Startup Helps You and Your Employees Deduct Pre-Tax Spending

An application called Alice will help business and their employees take advantage of pre-tax spending to the tune of hundreds or thousands of dollars every year.

A Peek at the Alice Pre-Tax Spending App

Alice gets connected to the payroll of participating employers and once it is up and running, it monitors the pre-tax eligible items employees spend. The items can be everything from childcare related expenses to prescriptions, ride-sharing, parking, monthly train passes and more.

The savings also extend to the business. According to the company, Alice can save employers around 8% of every dollar spent pre-tax by their employees. It does this by lowering Social Security, Medicare, local taxes, and unemployment premiums a business would have to pay.

The pain point Alice has solved is removing the complexities of implementing this type of benefit by a company, especially a small business.


What is Pre-tax Spending?

According to Alice, there are 10 categories of everyday expenses which count toward pre-tax spending. The amount you spend in these categories is not taxed on your paycheck.

So when your employees spend more in pre-tax, the amount of money your company pays in Social Security, Medicare, local taxes, and unemployment premiums is lower, benefiting both parties.

Alice can increase the take-home pay of enrolled employees by an average of $583.06. This, of course, can be higher depending on how much the employee spends in eligible expenses.

Here is a full list of the eligible expenses.

  • Mass-transit (train, subway, ferry, etc)
  • Parking (street parking, garages, etc)
  • Ride-sharing (UberPool, lyft via chariot vanpooling)
  • Child care (daycare, nannies, some pre-school)
  • Adult care (includes transportation costs)
  • Day Camp (summer, before school, after school)
  • Eye care (glasses, contacts, vision exam, etc)
  • Dental care (cleanings, x-rays, procedures)
  • Medical expenses (doctor co-pays, coinsurance, etc)
  • Prescriptions (mail order, pharmacy, etc)

Real World Math and Saving as Explained by the Company


  • Sarah commutes via the train, spending $121 on a 30-day transit card. That works out to $4.03 per day which is $1,472.17 per year
  • Sarah’s marginal tax rate is 35%. By paying for transit with her debit card that she connected to Alice, she will save 35% of the $1,472.17 she spends to ride the train.
  • Pre-tax spending with Alice puts $512.40 back into her take-home pay each year.

Sarah’s employer doesn’t have to pay the employer’s share of payroll taxes on the $1,472.17 she spent pre-tax. This results in a savings of $117.12 for the business.

So How Does the Company Get Paid?

Alice doesn’t have any setup or maintenance fees and out-of-pocket-costs to your business. It makes money by taking 50% of what you save on payroll taxes each pay period. On the employee side, Alice is free.

You can enroll here.

Image: Alice

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