Post-tax deductions

What are post-tax deductions?

Post-tax deductions are amounts subtracted from an employee’s wages after taxes have been calculated and withheld. These deductions do not reduce taxable income, but they are used to pay for various benefits, services, or obligations that are not eligible for pre-tax treatment.

Common post-tax deductions include Roth 401(k) contributions, union dues, charitable donations, and wage garnishments.

How do post-tax deductions work?

After calculating gross pay and applying required taxes (like income tax, Social Security, and Medicare in the U.S.), employers deduct any applicable post-tax items from the employee’s net pay.

Examples of common post-tax deductions:

• Roth 401(k) contributions
• Life insurance premiums
• Charitable donations
• Union dues
• Wage garnishments
• Loan repayments to the employer
  
  

These deductions are usually voluntary (except for legal obligations like garnishments) and are often outlined in employment agreements or benefit enrollment forms.

Why do companies use post-tax deductions?

Post-tax deductions allow companies to:

• Offer additional benefits that don’t qualify for pre-tax treatment, such as certain life insurance policies, Roth retirement plans, or charitable giving options.
  
  
• Fulfil legal obligations, such as wage garnishments or court-ordered payments.
  
  
• Support employee-directed contributions, like after-tax retirement savings (e.g., Roth 401(k)) or charitable donations.
  
  
• Provide flexibility in benefits administration for offerings that fall outside of pre-tax eligibility rules or regulatory limits.
  
  

Examples of post-tax deductions in practice

• An employee chooses to contribute to a Roth 401(k), which is deducted after taxes are withheld.
  
  
• A company deducts union dues from an employee’s paycheck each month.
  
  
• A worker repays a personal loan from the company through post-tax payroll deductions.
  
  

Post-tax vs. pre-tax deductions

Understanding the difference between post-tax and pre-tax deductions is key to managing payroll correctly and optimising employee take-home pay.

• Post-tax deductions are taken after taxes are calculated and do not reduce taxable income.
  
  
• Pre-tax deductions are subtracted before taxes are calculated. Pre-tax deductions does lower taxable income.
  
  

Some benefits may have both pre-tax and post-tax components, depending on plan design and jurisdiction.

Things to consider with post-tax deductions

Employers and employees should keep in mind:

• Which deductions are voluntary or mandatory.
  
  
• How deductions affect net pay and benefit eligibility.
  
  
• Proper documentation and employee consent (especially for non-required deductions).
  
  
• Local regulations that govern post-tax deductions and payroll reporting.
  
  

How Remote can help

Managing payroll deductions across multiple countries is complex, especially when laws and benefit eligibility vary. Remote helps you automate compliant payroll and deductions‌ — ‌whether pre-tax or post-tax‌ — ‌so your global team is paid accurately and on time.

Discover how Remote can help simplify your global HR today.