Someone told me I can pay my personal cell phone, and home internet bills pre-tax through my paycheck, what do they mean?
This is true. In fact, employees can use certain programs through IRS code 132(d), which allows the employee to pay for a portion of their personal cell phone bills, home internet bills, association or union dues, tools, supplies, certifications, etc., all on a pre-tax basis. Why does the IRS allow this? It’s simple, here’s a couple of examples. When you call in sick to work, you’re probably using your personal cell phone. When you send a work email from your home computer, you’re probably using your home internet. There are many other examples of everyday expenses that might be converted to legitimate tax-deductible business expenses.
Paying for these types of expenses on a pre-tax basis can add more money to your paycheck. Take an average $100/mo. cell phone plan. You can save 30% or more in taxes, which means your monthly income goes up by $30/mo. When adding these various expenses up and paying them pre-tax then you can generate some extra spendable cash.
This is also great news for your employers. Even though your net paycheck is higher than usual, your employer will also save. They save on things like payroll taxes and worker’s comp insurance due to their employees having lower taxable income. When adding these savings over multiple employees, your employer can save a significant amounts. Bringing this program to your employer’s attention will potentially save you money, and will make you an instant office hero to both your employer and your colleagues.
Added note: We have found that the average employee has $217/month in bills they can pre-tax. This saves them over $60/month in taxes. The employer will save about 9% on average if we include FICA and worker’s comp savings. That’s almost $20/month for each employer enrolled in this program.