Personal Income Tax (PIT)

What Is the Personal Income Tax (PIT)?

Personal Income Tax (PIT), also known as individual income tax, is a tax on employee earnings.

According to the IRS, earned income is money earned as an employee or as the owner of a business or farm. The list of taxable earned income includes the following:

Understanding how benefits interact with the personal income tax can help employers choose the best options to help employees balance their personal finances, retirement savings, and medical expenses.

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Which Benefits Reduce Personal Income Tax?

Certain benefits deductions apply pre-tax, meaning they reduce an employee’s total taxable income. With less income subject to tax, increasing pre-tax income can lessen the amount employees pay in personal income tax.

Currently, employees can take advantage of pre-tax deductions on medical insurance premiums, contributions to retirement accounts, child care expenses, and certain other business-related expenses. See our glossary entry on pre-tax deductions for a full list of pre-tax deductions to personal income tax.

Which Personal Income Tax Forms Should Employers Provide Employees?

The two most common tax forms employers send to their employees are Form W-2 (Tax and Wage Statement) and Form 1095-C (Employer-Provided Health Insurance Offer and Coverage). Self-employed contractors generally receive Form 1099-MISC or Form 1099-NEC.