What Is IRS Code Section 125 And How Does It Work
IRS Code Section 125 is basically a rule that lets employees pay for certain benefits using pre-tax dollars. That’s it. Sounds simple, because it is. But the impact? Bigger than most people think.
You’ve probably heard it called a “cafeteria plan.” Weird name, I know. It just means you get options. Like picking food in a cafeteria, except here you’re choosing benefits—health insurance, dependent care, stuff like that. And instead of paying after taxes hit your paycheck, you use money before taxes take their bite.
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