Every box on the W-2 explained — why your wages look different from your salary, what the Box 12 codes mean, and how to verify your W-2 is correct before you file.
A W-2 (Wage and Tax Statement) is the annual summary your employer sends you by January 31 showing what you earned and what was withheld during the prior tax year. It is the foundation of your federal and state tax return — the numbers you report on your 1040 come directly from your W-2.
If you worked for multiple employers during the year, you receive a separate W-2 from each. Your total wages and withholding for the return is the combined total from all W-2s. If you had both W-2 income and self-employment income, you also file Schedule SE for the self-employment portion.
Employers send W-2s by mail, through an employee portal, or both. If you have not received your W-2 by mid-February, contact payroll or HR first. If you still cannot obtain it, the IRS can contact your employer on your behalf if you call 1-800-829-1040.
Your federal taxable wage income for the year. This is the number you report on your Form 1040 as wages. Box 1 is not your gross salary. It is reduced by pre-tax deductions that lower your taxable income: traditional 401(k) contributions, health insurance premiums paid through a Section 125 cafeteria plan, HSA contributions through payroll, FSA contributions, and dental and vision premiums.
Example: If your salary is $70,000, you contributed $5,000 to a 401(k), and your health insurance premium was $2,400/year, Box 1 would show $62,600 ($70,000 − $5,000 − $2,400). This is the lower taxable wage number that determines how much federal income tax you owe.
The total federal income tax withheld from your paychecks throughout the year. This is the number that flows onto your 1040 as the amount you “already paid” toward your tax bill. If this exceeds your actual tax liability, the difference is your refund. If it falls short, you owe the difference (plus potentially an underpayment penalty).
The wages subject to Social Security tax. This is almost always higher than Box 1 because traditional 401(k) contributions reduce Box 1 but not Box 3. Social Security tax applies to 401(k) contributions even though they reduce your income tax. Box 3 is capped at $184,500 for 2026 — if your wages exceeded the wage base, Box 3 will show $184,500 regardless of actual earnings.
Health insurance premiums paid through a Section 125 plan do reduce Box 3 (same as Box 1). Only 401(k) contributions cause the divergence.
Exactly 6.2% of Box 3, capped at $11,439 for 2026 (6.2% × $184,500). If Box 4 shows anything other than 6.2% of Box 3, there is an error worth investigating. If you worked multiple jobs and each employer withheld Social Security independently, your combined Box 4 amounts across all W-2s could exceed $11,439 — the excess is refundable on your tax return as an overpayment of Social Security tax.
The wages subject to Medicare tax. Medicare has no wage base cap, so Box 5 equals Box 3 for most workers (both reduce by Section 125 deductions, neither caps). For workers earning above $184,500, Box 5 will be higher than Box 3 because Social Security caps at $184,500 but Medicare does not. Box 5 is almost always the same as or higher than Box 3.
The Medicare taxes withheld. For most workers, this is 1.45% of Box 5. For workers who earned above $200,000 from this employer, it includes the additional 0.9% Additional Medicare Tax on wages above that threshold (making the effective rate 2.35% on wages above $200,000). Box 6 should equal 1.45% of Box 5, plus 0.9% of any wages above $200,000 paid by this employer.
The most common question about W-2s: “My salary was $75,000, so why does Box 1 say $63,000?”
Box 1 reflects your taxable wages after pre-tax deductions. The gap is intentional and in your favor — every dollar in that gap was excluded from income tax. Here is the math for a worker earning $75,000:
Box 3 (Social Security wages) for the same worker would be $65,100 — $75,000 minus the $9,900 in Section 125 deductions (health + dental + HSA), but not minus the $7,500 401(k). Box 5 (Medicare wages) would be the same as Box 3: $65,100.
Roth 401(k) contributions do not reduce any W-2 box. They are paid with after-tax dollars, so they appear in Box 12 (Code AA) but do not reduce Box 1, 3, or 5.
Box 12 appears up to four times on a W-2 and uses letter codes to report amounts that do not fit neatly into the numbered boxes. The amounts here are informational or relate to specific tax treatments. Here are the codes you are most likely to see:
| Code | What It Reports | Taxable? |
|---|---|---|
| D | Traditional 401(k) contributions (employee). This should match your YTD 401(k) deduction from your pay stub. | Not in Box 1; taxed at withdrawal |
| AA | Roth 401(k) contributions. Already in Box 1 because Roth is after-tax. | Already in Box 1 |
| E | 403(b) contributions (employee), the retirement plan for non-profits, schools, hospitals. | Not in Box 1 |
| EE | Roth 403(b) contributions. After-tax equivalent of Code AA. | Already in Box 1 |
| W | HSA contributions made through your employer (both your contributions via payroll and any employer contributions). Total should match your HSA contributions from your pay stub plus any employer contribution. | Not in Box 1 or Boxes 3/5 |
| DD | Cost of employer-sponsored health coverage (your premium plus employer’s premium combined). This is informational only — it does not add to your taxable income. It helps the IRS track the total cost of employer health benefits. | Informational only; not taxable |
| C | Taxable cost of group-term life insurance over $50,000 of coverage. If your employer provides life insurance exceeding $50,000, the premium cost for coverage above that is imputed income and included in Box 1. | Included in Box 1 |
| G | Contributions to a 457(b) deferred compensation plan (government and some non-profit employees). | Not in Box 1 |
The Retirement Plan checkbox is checked if you were an active participant in an employer-sponsored retirement plan (401(k), 403(b), SIMPLE IRA, pension) at any point during the year. This matters for IRA deductibility: if Box 13 is checked and your income is above certain IRS thresholds, your traditional IRA contribution may not be fully deductible.
The Third-Party Sick Pay checkbox is checked if the employer is reporting sick pay paid by a third-party insurer (e.g., short-term disability income paid by an insurance company). This affects tax treatment of the sick pay.
Box 15 shows your employer’s state ID number. Box 16 shows your state wages (often the same as or similar to Box 1, but may differ based on state-specific rules for pre-tax deductions). Box 17 shows state income tax withheld, which you use to complete your state tax return. If you worked in multiple states during the year, there may be multiple lines in this section.
Used for cities or counties with local income taxes (New York City, Philadelphia, Baltimore County, etc.). Box 18 shows local wages, Box 19 shows local tax withheld, and Box 20 identifies the locality. If you do not live or work in a locality with an income tax, these boxes will be blank.
Pull your last pay stub of the previous year alongside your W-2 and work through these five checks:
Now that you know how W-2 wages are calculated, run your own numbers to see exactly what you take home after every deduction.
Calculate My Take-Home Pay →A W-2 (Wage and Tax Statement) is the annual form your employer sends by January 31 showing total wages earned and taxes withheld during the prior year. You use it to file your federal and state tax returns. Multiple employers each send their own W-2.
Box 1 shows federal taxable wages after pre-tax deductions. Traditional 401(k) contributions, health insurance premiums through a Section 125 plan, HSA contributions via payroll, FSA contributions, and dental and vision premiums all reduce Box 1. The gap between your gross salary and Box 1 represents income that is excluded from federal income tax.
Traditional 401(k) contributions reduce Box 1 (federal taxable wages) but not Box 3 (Social Security wages). Social Security tax applies to 401(k) contributions even though they reduce income tax. If you contributed $6,000 to a 401(k), Box 3 will be $6,000 higher than Box 1, all else equal.
Box 12 uses letter codes to report retirement contributions and other specific amounts. The most common: Code D = traditional 401(k) contributions; Code AA = Roth 401(k) contributions; Code W = HSA contributions through payroll; Code DD = total employer-sponsored health coverage cost (informational only); Code E = 403(b) contributions.
Employers must furnish W-2s by January 31 of the following year. Your 2025 W-2 must be available by January 31, 2026. If you have not received it by mid-February, contact HR or payroll first. The IRS can intervene if necessary.
Box 13 has checkboxes. The “Retirement Plan” box is checked if you participated in an employer-sponsored retirement plan during the year. This is important because it can limit the deductibility of a traditional IRA contribution if your income exceeds certain IRS thresholds.
Contact payroll or HR and request a corrected W-2 (W-2c). Do not file your return with a known error. If you cannot obtain a correction before the deadline, file using IRS Form 4852 as a substitute W-2 — but expect possible follow-up from the IRS to verify the discrepancy.
Compare your W-2 against your final pay stub of the year. Box 1 should reflect gross wages minus pre-tax deductions. Box 2 should match federal tax withheld YTD. Box 4 should be exactly 6.2% of Box 3 (capped at $11,439 if Box 3 hit $184,500). Box 12 Code D should match your YTD 401(k) contribution.