Payroll Tax Savings Calculator
See how much your company saves in FICA and FUTA taxes by offering pre-tax benefits
What This Means For You
Every dollar your employees pay toward benefits with pre-tax dollars saves both of you on payroll taxes. This tool shows you exactly how much your business could save by structuring your benefits contributions correctly. Many small businesses leave this money on the table simply because they do not have a Section 125 plan set up.
Enter your payroll information and benefits details below. The calculator will show you the combined tax savings for your business and your employees. For most companies, the savings more than pay for the minimal cost of setting up and maintaining the plan.
Your Payroll Tax Savings
Savings by Benefit Type
Detailed Breakdown
| Benefit | Pre-Tax $ | Employer FICA | Employer FUTA | Total |
|---|
Why Pre-Tax Benefits Reduce Employer Taxes
When employees make pre-tax elections under Section 125 (cafeteria plans), IRC Section 132(f) (commuter), or IRC Section 401(k) (retirement), those amounts are excluded from the employee's taxable wages. Because FICA and FUTA are calculated on taxable wages, the employer's share of these taxes drops proportionally. The savings are automatic and ongoing — no special filing required.
FICA Tax (Employer Share): Employers pay 7.65% of each employee's taxable wages — 6.2% for Social Security (OASDI) on wages up to the 2026 wage base of $184,500, plus 1.45% for Medicare on all wages (no cap). Pre-tax benefit deductions reduce these taxable wages. For employees earning above $184,500 (2026), only the 1.45% Medicare portion generates savings on amounts that push wages above the threshold.
FUTA Tax: Federal Unemployment Tax is 6.0% on the first $7,000 of each employee's annual wages. Most employers qualify for a 5.4% state tax credit, yielding an effective rate of 0.6%. Pre-tax deductions reduce the first $7,000 of taxable wages, but the impact is limited since the FUTA wage base is low. We calculate FUTA savings on a per-employee basis where pre-tax deductions pull the taxable wage below $7,000.
Employee Tax Savings: Estimated using a 25% combined marginal rate (federal income tax + state income tax + employee FICA 7.65%). Actual rates vary by employee income level and state.
Pre-Tax Benefit Amounts: For each benefit, the annual pre-tax total = number of employees x participation rate x average election. Section 125 premiums, FSA, HSA, DCAP, and 401(k) use annual elections. Commuter/transit uses monthly election x 12.
Sources: IRS Publication 15 (Circular E) 2026, IRC Section 125, IRC Section 132(f), IRC Section 223 (HSA), IRC Section 129 (DCAP), IRC Section 401(k), IRS Rev. Proc. 2025-19 (HSA), IRS Rev. Proc. 2025-32 (FSA, commuter), IRS Notice 2025-67 (401(k)), SSA 2026 Wage Base ($184,500), FUTA per IRC Section 3301.
Want Help Maximizing Your Payroll Tax Savings?
A benefits advisor can design a pre-tax benefit strategy tailored to your workforce and budget.
Getting Started — Your Next Steps
- Note your key numbers from the results above
- Discuss findings with your leadership team or co-owner
- Contact 2-3 providers for customized proposals
- Ask about contract terms, minimum commitments, and cancellation policies
- Build a 90-day timeline for evaluating and implementing your chosen option