Resources |Calculators |Section 125 Cafeteria Plan

Section 125 Cafeteria Plan

A "Section 125 Cafeteria Plan", often referred to as a "Flexible Spending Account", helps you keep more of your paycheck by reducing your Federal and state taxes. It allows you to pay certain expenses before taxes are deducted from your paycheck. These expenses include daycare, insurance premiums and most out-of-pocket medical costs. Use this calculator to see how participating in your employer's "Section 125 Cafeteria Plan" can help you pay less tax, and increase your net take home pay. This calculator has been updated to use the new withholding schedules included with the 2009 Stimulus Bill.

Definitions

Pay period

This is how often you are paid. Your selections are: Weekly (52 paychecks per year), Every other week (26 paychecks per year), Twice a month (24 paychecks per year), Monthly (12 paychecks per year), and Annually (one paycheck per year).

 

Gross pay

This is your gross pay, before any deductions, for the pay period. Please enter a dollar amount from $1 to $1,000,000.

 

Filing status

This is your income tax filing status. The choices are "Single" and "Married". Choose "Married" if you are married or file as "head of household". Choose "Single" if you file your taxes as a single person or if you are married but file separately.

 

Number of allowances

When your Federal income tax withholdings are calculated, you are allowed to claim allowances to reduce the amount of the Federal income tax withholding. In 2009, each allowance you claim is equal to $3,650 of income that you expect to have in deductions when you file your annual tax return. The number of allowances you should claim depends largely on the number of dependents you have and your itemized deductions. This calculator allows from 0 to 99 allowances.

 

401(k)/403(b) plan withholding

This is the percent of your gross income you put into a taxable deferred retirement account such as a 401(k) or 403(b). While increasing your retirement account savings does lower your take home pay, it also lowers your Federal income tax withholdings. The impact on your paycheck might be less than you think. While your plan may not have a deferral percentage limit, this calculator limits deferrals to 80% to account for FICA (Social Security and Medicare) taxes. Please note that your 401(k) or 403(b) plan contributions may be limited to less than 80% of your income. Check with your plan administrator for details. For 2009, the maximum contribution to a 401(k) or 403(b) is $16,500 per year for individuals under 50 and $22,000 for individuals 50 or older.

 

State and Local Taxes

This is the percentage that will be deducted for state and local taxes. We take your gross pay, minus $3,650 per allowance, times this percentage to calculate your estimated state and local taxes. Please note, this calculator can only estimate your state and local withholdings.

 

"Section 125 Cafeteria Plan" expenses per pay period

The amounts that you wish to have deducted from your paycheck each pay period for your "Section 125 Cafeteria Plan". The expenses are broken down into four categories. All amounts you enter here are considered pre-tax deductions from your paycheck when you participate in your company's "Section 125 Cafeteria Plan". We consider all of these expenses to be ordinary after-tax expenses if you do not participate in your "Section 125 Cafeteria Plan" .

 

FICA OASDI

FICA Old Age Survivors and Disability Insurance. FICA OASDI is calculated as your gross earnings times 6.2%. Please note that this calculator does not make any assumptions as to the total FICA OASDI paid for the current year. For 2009, incomes over $106,800 that have already had the maximum FICA OASDI amount of $6621.60 withheld will not have additional FICA OASDI withholdings.

 

FICA Medicare

FICA Medicare is calculated as the gross earnings times 1.45%. Unlike FICA OASDI there is no annual limit to FICA Medicare deductions.

 

Federal tax withholding calculations

Federal income tax withholdings were calculated by:

1. Multiplying taxable gross wages by the number of pay periods per year to compute your annual wage.
2. Subtracting the value of allowances allowed (for 2009, this is $3,650 multiplied by withholding allowances claimed).
3. Determining your annual tax by using the tables below (single and married rates, respectively).
4. Dividing the amount of tax by the number of pay periods per year to arrive at the amount of federal withholding tax to be deducted per pay period.

Single Withholding Rates*

Annual taxable income between these amounts		Annual withholding	Withhold additional % of income over this amount
$0.00	$7,180.00	$0.00
$7,180.00	$10,400.00	$0.00	10%	$7,180.00
$10,400.00	$36,200.00	$322.00	15%	$10,400.00
$36,200.00	$66,530.00	$4,192.00	25%	$36,200.00
$66,530.00	$173,600.00	$11,774.50.00	28%	$66,530.00
$173,600.00	$375,000.00	$41,754.10	33%	$173,600.00
$375,000.00	(no limit)	$108,216.10	35%	$375,000.00
*This information is from IRS Publication 15-T, Rev. March 2009, for wages paid in 2009.

Married Withholding Rates*

Annual taxable income between these amounts		Annual withholding	Withhold additional % of income over this amount
$ 0.00	$15,750.00	$0.00
$15,750.00	$24,450.00	$0.00	10%	$15,750.00
$24,450.00	$75,650.00	$870.00	15%	$24,450.00
$75,650.00	$118,130.00	$8.550.00	25%	$75,650.00
$118,130.00	$216,600.00	$19,170.00	28%	$118,130.00
$216,600.00	$380,700.00	$46,741.60	33%	$216,600.00
$380,700.00	(no limit)	$100,894.60	35%	$380,700.00
*This information is from IRS Publication 15-T, Rev. March 2009, for wages paid in 2009.