What does it mean when you have pre-tax dollar health insurance premiums deducted from your pay?

When you pay for benefits such as health insurance with pre-tax (also called before-tax) dollars, the deductions are taken off your gross income before income taxes are paid. Taxes are then calculated on the reduced salary amount. Having pre-tax dollar deductions results in less income tax paid than would otherwise be the case.

Examples of items that can be paid with pre-tax dollars include medical and dental insurance and employee parking fees. By way of contrast, after-tax dollar deductions are …