The primary difference between pre-tax and post-tax deductions is:

Question

Quizplus · Accepted Answer

Pre-tax deductions, such as contributions to a 401(k) plan or health insurance premiums, are deducted from an employee's income before taxes are applied. This means that the employee's taxable income is reduced, resulting in a lower tax liability. On the other hand, post-tax deductions, such as charitable contributions or Roth IRA contributions, are made after taxes are applied and do not directly reduce tax obligations.

The Primary Difference Between Pre-Tax and Post-Tax Deductions Is