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University at Buffalo Foundation, Inc.
P.O. Box 900
Buffalo, NY 14226-0900
Phone: (716) 645-3013
Fax: (716) 645-3475
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Pre-Tax Payment
The Flexible Benefits Program, in addition to offering you a choice of benefits, provides significant tax advantages. Any cost of benefits to you will be paid via salary reduction. What this means is that you will be paying these costs with pre-tax dollars. This effectively lowers your taxable income and, therefore, the taxes withheld from your paycheck. The two examples below illustrate the tax savings associated with salary reduction. The after-tax column shows take home pay assuming all expenses are paid post-tax. The before-tax column shows take-home pay assuming expenses are paid on a pre-tax basis via salary reduction. Keep in mind that the actual tax impact may vary depending on your own tax situation.
| John is single. He anticipates spending $500 for unreimbursed medical care. What are the tax savings from the use of the Flexible Spending Account? | Kate is married and knows she will incur child care costs of $1,000 for the year. What are her tax savings from the use of the Flexible Spending Account? | |||
| Income (after deductions) | $20,000 | $20,000 | $35,000 | $35,000 |
| Less: Pretax expenses | $0 | ($500) | $0 | ($1,000) |
| Taxable Income | $20,000 | $19,500 | $35,000 | $34,000 |
| Less Taxes | ||||
| Federal | ($3,189) | ($3,049) | ($5,777) | ($5,497) |
| Social Security | ($1,530) | ($1,492) | ($2,678) | ($2,601) |
| State | ($1,210) | ($1,173) | ($2,051) | ($1,978) |
| Net Income | $14,071 | $13,786 | $24,494 | $23,924 |
| Less: After tax expenses | ($500) | $0 | ($1,000) | $0 |
| Take Home Pay | $13,571 | $13,786 | $23,494 | $23,924 |
| Tax Savings | $215 | $430 | ||
This example is intended to highlight the benefit plans provided by UBFA. The plan's official documents and contracts will govern in all cases.