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IRS Section 125 Under IRS Section 125, employers can offer employees a variety of nontaxable benefits. Qualified benefits include health care, vision care, dental care, group term life insurance, and disability, as well as adoption assistance. These benefits fall under the term "cafeteria plans." IRS Section 125 cafeteria plans are referred to as such because employees can choose between two or more benefits or cash salary. If benefits are chosen, they are excluded from an employee's gross income. In other words, these benefits, when deducted, are done so with pre-tax dollars. IRS Section 125 - Flexible Spending Accounts Another option available to employees under IRS Section 125 is the flexible spending account. Employees can use these accounts to pay for qualified expenses not covered by another plan or dependent care assistance program. Under such a plan, an employee's contribution to the account is deducted from his or her paycheck on a pretax basis. These contributions are not considered wages, and are therefore not subject to income taxes. IRS Section 125 plans can be used to pay for expenses of both the person covered and their dependents or domestic partners. Unlike many health care plans, the funds in a flexible spending account or other such cafeteria plan, such as those from take care, can be used to cover over the counter medications, daycare expenses, and even adoption expenses. Even if your spouse has a comprehensive medical plan, there is no limit to the total medical expenses that can be covered under a flexible spending account. Such accounts can help you pay for additional expenses not paid for under your spouse's plan. |
Additional Topics Consumer-Directed Health Plans Consumer-Driven Health Accounts Dependent Care Flexible Spending Accounts Flexible Health Spending Accounts Flexible Medical Expense Accounts Health Care Flexible Spending Accounts Health Reimbursement Arrangements IRS Section 125 Cafeteria Plans Medical Expenses and Income Tax Plan for Medical that Health Insurance Doesn't Cover Save 25% to 40% on Health Expenses Save on Co-Pays and Over-the-Counter Medications Save on LASIK and Orthodontic Costs Section 125 Plan Administration |
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