Definition of Deductions: Tax and Non-tax Deductions

Deductions Definition

The law requires employers to deduct taxes from employee wages. Employers can also deduct wages voluntarily for health insurance plans, retirement plans, etc.

Deductions Extended Definition
Any business with employees is required by law to withhold taxes from employee paychecks. Payroll withholdings must be paid toward federal, state, and local taxes.

Federal tax withholding rules are administered by the IRS, while state revenue agencies are responsible for overseeing state tax withholding.

Employers may also make voluntary payroll deductions in agreement with employees.

Deductions can be either pre-tax or post-tax. Employers must report deductions using different IRS forms. For more information, please consult the IRS.

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Last Updated By

Maria Tanski-Phillips | Feb 22, 2023

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