How can I minimize or avoid taxes on severance pay?

Severance pay is generally considered taxable income in the United States and is subject to federal, state, and local taxes. However, with strategic planning, you can minimize the tax impact or defer some of the taxes associated with severance payments. Below are several strategies to consider: 1. Defer Severance Pay 2. Contribute to a Tax-Advantaged … Read more

Which is better: pre-tax or after-tax contributions?

Whether pre-tax or after-tax contributions are better depends on your financial situation, current income level, and future tax considerations. Each type of contribution has its advantages and trade-offs. Below is a breakdown to help you decide which might be better for your circumstances. What Are Pre-Tax and After-Tax Contributions? Pre-Tax Contributions After-Tax Contributions When Pre-Tax … Read more

Under what circumstances are group disability benefits tax-free for the insured?

Group disability benefits can be either taxable or tax-free to the insured, depending on how the insurance premiums were paid and who paid them. Understanding these circumstances is crucial for both employers and employees to manage tax liabilities effectively. Circumstances When Group Disability Benefits Are Tax-Free 1. Employee Pays Premiums with After-Tax Dollars 2. Employer … Read more

What is SDI tax?

SDI Tax (State Disability Insurance Tax) The State Disability Insurance (SDI) tax is a payroll tax deducted from employees’ wages in certain states to fund short-term disability insurance programs. These programs provide partial wage replacement to eligible workers who are unable to work due to non-work-related illness, injury, or pregnancy. The SDI tax is most … Read more

What is the Medicare tax?

Medicare tax is a federal payroll tax that funds the Medicare Hospital Insurance (HI) program, which provides health insurance for individuals aged 65 and older, as well as for certain younger people with disabilities or specific medical conditions. This tax is imposed on earned income and is paid by both employees and employers, as well … Read more