Cafeteria Plan Tax Savings Calculator

Enter your annual income, tax filing status, and pre-tax benefit amounts — including health insurance premiums, FSA contributions, dependent care, and other eligible expenses — to see your estimated annual tax savings from a Cafeteria Plan (Section 125). You'll get a breakdown of your federal, state, and FICA tax savings, plus your projected increase in take-home pay.

Your total gross income before any deductions.

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Enter your state's income tax rate. Enter 0 if your state has no income tax.

Annual employee-paid health insurance premiums.

Annual employee-paid dental and vision insurance premiums.

Annual FSA contribution for medical expenses. IRS limit is $3,200 for 2024.

Annual FSA contribution for dependent/childcare expenses. IRS limit is $5,000.

Results

Total Annual Tax Savings

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Federal Income Tax Savings

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State Income Tax Savings

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FICA (Social Security & Medicare) Savings

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Total Pre-Tax Deductions

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Savings Per Paycheck

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Estimated Federal Tax Rate Used

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Tax Savings Breakdown

Frequently Asked Questions

What is a Section 125 Cafeteria Plan?

A Section 125 Cafeteria Plan — also called a Premium Only Plan (POP) or flexible benefits plan — is an IRS-approved program that allows employees to pay for eligible benefits like health insurance premiums and FSA contributions with pre-tax dollars. This reduces taxable income, lowering the amount of federal, state, and FICA taxes both the employee and employer pay.

What kinds of expenses can be paid pre-tax through a Cafeteria Plan?

Eligible pre-tax benefits typically include employer-sponsored health, dental, and vision insurance premiums, group term life insurance, disability insurance, Healthcare Flexible Spending Account (FSA) contributions, and Dependent Care FSA contributions for childcare or elder care costs.

How much can I save with a Section 125 plan?

Your savings depend on your income, tax bracket, and total pre-tax elections. Employees can typically increase their take-home pay by 20–40%. For example, an employee earning $65,000 with $7,000 in pre-tax benefits could save over $2,000 annually in combined federal, state, and FICA taxes.

What is the FICA tax savings in a Cafeteria Plan?

FICA taxes include Social Security (6.2%) and Medicare (1.45%), totaling 7.65% of wages. Pre-tax deductions under a Section 125 plan reduce your FICA-taxable wages, meaning both you and your employer save on these payroll taxes — making it a benefit for businesses as well.

What is the FSA contribution limit for 2024?

For 2024, the IRS limits Healthcare FSA contributions to $3,200 per year per employee. The Dependent Care FSA limit remains $5,000 per household (or $2,500 if married filing separately). These limits are set annually by the IRS and may be adjusted for inflation.

Does my employer also save money with a Cafeteria Plan?

Yes. Employers save the matching FICA taxes (7.65%) on every dollar employees redirect to pre-tax benefits. For a company with many employees making significant pre-tax elections, these savings can be substantial and often more than offset the administrative cost of maintaining the plan.

Are Cafeteria Plan savings the same in every state?

No. Most states follow federal tax treatment and allow pre-tax deductions to reduce state taxable income as well, but a few states (like New Jersey and Pennsylvania) do not conform to federal Section 125 rules, meaning state taxes may still apply to these deductions. Check with your state's tax agency or a tax advisor for your specific situation.

Is this calculator giving me exact tax figures?

This calculator provides an estimate based on simplified federal tax brackets and the state tax rate you enter. Actual tax savings depend on your complete tax situation, deductions, credits, and local taxes. For precise figures, consult a qualified tax professional or benefits administrator.

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