Question

Under a 125 plan pretax deductions are subject to what federal taxes?

A. FICA, FUTA and FIT
B. FICA and FUTA
C. FICA
D. None

Answer 1

Pretax deductions under a 125 plan are subject to FICA taxes, which include Social Security and Medicare taxes, but not Federal income tax.

Step-by-step explanation:

Under a 125 plan, pretax deductions are not subject to Federal income tax (FIT), but they are subject to FICA taxes. FICA stands for the Federal Insurance Contributions Act and includes taxes for Social Security and Medicare. Therefore, the correct answer is C. FICA taxes. Pretax deductions under a 125 plan are subject to FICA taxes, which include Social Security and Medicare taxes, but not Federal income tax.