Fundamental Payroll Certification (FPC) Practice Exam

Which of the following deductions is typically NOT considered an after-tax deduction?

1. Charitable contributions

2. Union dues

3. Health savings account contributions

4. Federal income tax

The correct answer is: Federal income tax

Federal income tax is not considered an after-tax deduction because it is withheld from an employee's gross pay before they receive their take-home pay. This means that income tax is deducted at the source, impacting the pre-tax income of the employee. In contrast, the other options listed are typically after-tax deductions. Charitable contributions are made from the net income after federal, state, and Social Security taxes have been deducted, allowing the contributor to take advantage of any potential tax deductions on their tax return for those contributions. Union dues are also paid from net income and do not lower the employee's taxable income at the time of payment. Health savings account contributions can vary, but they are often made as pre-tax contributions, particularly when facilitated through an employer's plan, and can provide tax benefits. However, if paid outside of a payroll deduction program, they might be considered after-tax contributions. Thus, federal income tax stands out as the deduction that is taken from gross income prior to calculating any after-tax deductions.