Before-tax deduction is the amount the employer reduces an employee’s gross salary before taxes are taken out. It helps employees because the taxable income is reduced. Employers also benefit as less money is paid to the government for tax purposes. Even though employers choose to offer this benefit, around 86 percent of employers do in some way to their employees.

A before-tax deduction lets an individual or family choose to purchase health insurance or a life insurance policy that is free of income tax. In the case of an individual, he would have to reduce his taxable income from his salary. A life insurance policy provides financial help for families in case of the insured person’s death by covering the expenses for funeral and burial costs.

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