Form W-2, which reports your wages and tax information, includes Box 12, where various codes are used to indicate different types of compensation, deductions, and benefits. Understanding these codes can help you determine potential tax deductions and credits.
Common W-2 Box 12 Codes and Their Tax Implications
Retirement Contributions
- D – 401(k) elective deferrals (pre-tax contributions reduce taxable income).
- E – 403(b) elective deferrals (pre-tax retirement contributions for non-profits and schools).
- G – 457(b) deferred compensation (for government and some non-profit employees).
- S – 408(k)(6) SEP (Simplified Employee Pension plan contributions).
Tax Impact: Contributions to pre-tax plans lower taxable income, but they do not qualify for immediate tax credits.
Health & Benefits-Related Contributions
- W – Health Savings Account (HSA) contributions (pre-tax savings for medical expenses).
- DD – Employer-sponsored health coverage (informational only, not taxable).
- J – Non-taxable sick pay (paid by a third party, such as an insurance company).
Tax Impact: HSA contributions are tax-deductible, and distributions used for qualified medical expenses are tax-free.
Fringe Benefits & Other Compensation
- C – Taxable group-term life insurance over $50,000 (included in taxable income).
- L – Substantiated employee business expense reimbursements (non-taxable if under an accountable plan).
- P – Excludable moving expense reimbursements for military (non-taxable for qualifying members).
Tax Impact: Some benefits are tax-free, while others (like excess life insurance) may increase taxable wages.
Stock & Deferred Compensation Plans
- V – Income from the exercise of nonstatutory stock options (taxable as ordinary income).
- Y – 409A deferred compensation (may be subject to additional taxes).
Tax Impact: Stock options and deferred compensation could increase taxable income and require additional tax withholding.
Potential Tax Deductions & Credits
- Saver’s Credit: If you contributed to a 401(k), 403(b), or IRA (codes D, E, G, or S), you may qualify for the Retirement Savings Contributions Credit.
- HSA Deduction: If you made HSA contributions (Code W), you may be able to claim additional tax deductions on Form 8889.
- Dependent Care Credit: If your W-2 has Code W and you used HSA funds for childcare, you may need to adjust the Dependent Care Credit on your tax return.
