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How are “tax savings” created through a Cafeteria Plan?

April 26, 2017cafeteria Plan tax savings

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How are “tax savings” created through a Cafeteria Plan?

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Your contributions to a cafeteria Plan are made through a Salary Reduction. This, in effect, lowers your taxable income by the amount of your election, hence reducing your income and possibly payroll taxes. Any reimbursements made from the plan to you are tax-free in nature.