Answer to Question #170773 in Accounting for Milan

Question

What does Pretax mean?

What does After tax mean?

Answer 1

The term “pretax” means your deductions (things like health insurance premiums and retirement contributions) are taken out of paycheck before any state or federal taxes are withheld. This is also known as gross pay.

After tax is defined as “relating to income remaining after deducting taxes due”. Basically, this is the actual amount of the salary that goes into the employee's bank account.