In many cases, knowing the full definition of a word or phrase makes all the difference. What Does Pre-Tax Mean? Pre-tax dollars is a phrase that is often used in conjunction with retirement planning and 401k contributions. In fact, one of the benefits of a 401k plan is that contributions are made with pre-tax dollars. But, what is the definition of pre-tax dollars, anyway? When an employee gets paid, there are numerous deductions that get taken out of their paycheck. These payroll deductions range from income tax withholding to FICA taxes to voluntary contributions for things like health insurance or cafeteria plans (Section 125 plans).