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A post-tax deduction (or after-tax deduction) is an amount of money that is subtracted from an employee’s pay after all applicable taxes (federal, state, and local income tax, Social Security, and Medicare) have been calculated and withheld. Unlike a pre-tax deduction, a post-tax deduction does not reduce an employee’s current year’s taxable income or the amount of taxes they owe. Employees pay taxes on the full gross income, even though the deduction is taken out. Examples of Post-Tax Deductions:

Roth 401(k) Contributions

Contributions are made with money that has already been taxed, but qualified withdrawals in retirement are tax-free.

Wage Garnishments

Court-ordered deductions for debts like child support, student loans, or unpaid taxes. These are mandatory, not voluntary.

Certain Insurance Premiums

Premiums for certain types of life insurance, disability insurance, or voluntary supplemental policies, depending on the plan’s structure.

Charitable Contributions

Donations to a charity made through payroll deduction.

Union Dues

Fees paid to a labor union.

Repayment of an Employer Loan or Advance

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Wage Garnishments

Courts, regulatory agencies and the IRS may order you to withhold a portion of an employee’s post-tax or net wages to cover unpaid taxes, child support, alimony or defaulted loans. The types of income that can be garnished include:
  • Hourly wages
  • Salaries
  • Commissions
  • Bonuses
  • Pensions and retirement plan payments
The garnishment order will typically specify the withholding amount or percentage of withholding and where to send payment. Read and understand these documents carefully. If you deduct garnishments incorrectly or fail to pay them entirely, your business could be liable for the back payments, not the employee. In addition to the garnishment order itself, you must abide by Title III of the Consumer Credit Protection Act (CCPA). This law restricts how much of an employee’s wages can be garnished per week and prevents you from firing an employee if his or her pay is garnished for any one debt.

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Add Child Support Post-Tax Deduction

To learn how to apply wage garnishments other than child support, see the Miscellaneous Post-Tax Deduction guide below.
A common wage garnishment is child support. Dripos has made a specific post-tax deduction tool for child support:
1

Navigate to Dashboard > Finance > Payroll > Post-Tax Deductions > Add
2

Select the employee(s) to apply this specific child care post-tax deduction to and select Type = Child Care > click Add
3

Complete the following fields:

Max Percent

Enter the maximum percentage of the employee’s income that will be deducted.

External ID

The unique identifier of the garnishment order, listed as the case number on the order.

Issue Date

The date the collections agency issued the order

Amount

Per pay period amount to deduct

Description

Enter a description for the deduction. This is optional but can be helpful for record-keeping.

Agency

Select the state agency which issued the child support.
4

Click Add once complete. This post-tax deduction will go into effect in the employee’s next payrun.

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Miscellaneous Post-Tax Deductions

Use this guide for adding wage garnishments other than childcare and all voluntary post-tax deductions.
Since voluntary deductions are optional, you must ensure your employees are fully aware of them and provide written consent before you withhold funds for insurance premiums or any other benefit.
Common Examples of Voluntary Post-Tax Deductions:
  • Roth 401(k) or Roth 403(b) contributions: The money is taxed now, but qualified withdrawals in retirement are tax-free.
  • Certain Insurance Premiums: Often for supplemental life or disability insurance, depending on the specific plan.
  • Union Dues: Membership fees for a labor union.
  • Charitable Contributions: Donations made through an employer’s workplace giving program.
  • Payments for other benefits or services: Such as employee stock purchase plans or some fitness/wellness program fees.

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Add Miscellaneous Post-Tax Deduction

1

Navigate to Dashboard > Finance > Payroll > Post-Tax Deductions > Add
2

Select the employee(s) to apply this post-tax deduction to and select Type = Miscellaneous.
3

Complete the following fields:

Amount

Enter the fixed amount of the deduction, if applicable. Use either percent or amount

Total Amount

Total amount is for the entire effective period of a deduction, and may span multiple payrolls or multiple years if applicable. Use either annual or total limit.

Start Date

Select the start date for the deduction. This is the date from which the deduction will begin.

End Date

Select the end date of the deduction. If unsure or indefinite, select Never

Annual Limit

Enter the annual limit for the deduction, if applicable. Use either annual or total limit.

Description

Enter a description for the deduction. This is optional but can be helpful for record-keeping.

Percent

Enter the percentage of the employee’s income that will be deducted. Use either percent or amount
4

Click Add to create the post-tax deduction.
Edit or delete any post-tax deduction by clicking View on an employee’s deduction.

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View Post-Tax Deductions in Payroll

All post-tax deductions to be applied during a payrun will appear on page 4 for review. Once payroll is completed, page 5 will also show the post-tax deduction applied.
Employees can view their the post-tax deductions on their paystubs.
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