Does W-2 Box 1 Include 401(k) Contributions?
Understand how your 401(k) contributions, both pre-tax and Roth, are reflected in W-2 Box 1.
The W-2 form, officially known as the Wage and Tax Statement, is an annual tax document employers issue. It summarizes an employee’s total wages, tips, compensation, and federal, state, and local taxes withheld. Employees use it to prepare their tax returns, and employers must send W-2 forms by January 31st each year.
Understanding W-2 Box 1
Box 1 on the W-2 form, labeled “Wages, tips, other compensation,” represents the income taxable for federal income tax purposes. This figure is what your employer reports to the IRS as your federal taxable wages. It encompasses your gross earnings, including salary, bonuses, and certain taxable fringe benefits.
The amount in Box 1 often differs from your total gross pay because it is reduced by pre-tax deductions. These deductions, such as health insurance premiums or flexible spending accounts, are subtracted from gross income before federal income tax is calculated. Box 1 reflects your income after these adjustments, determining your federal income tax liability.
How Pre-Tax 401(k) Contributions Affect Box 1
Pre-tax 401(k) contributions reduce the amount reported in W-2 Box 1. This occurs because contributions to a traditional 401(k) plan are made with pre-tax dollars, meaning they are excluded from your taxable income for federal income tax purposes in the year they are contributed. This pre-tax treatment lowers your adjusted gross income, which can result in a lower federal income tax liability for the year.
While not included in Box 1, pre-tax 401(k) contributions are reported on your W-2 form. Employers list the total amount in Box 12, identified by Code D. Box 12 uses various codes to indicate different types of deferred compensation and benefits, providing information to the IRS.
Pre-tax 401(k) contributions reduce federal taxable wages in Box 1, but are still subject to Social Security and Medicare taxes. Therefore, amounts in Box 3 (Social Security wages) and Box 5 (Medicare wages and tips) on your W-2 may be higher than Box 1.
Reporting Roth 401(k) Contributions
Roth 401(k) contributions are treated differently from pre-tax contributions for W-2 Box 1. These contributions are made with after-tax dollars, so they do not reduce your current taxable income. The amount you contribute to a Roth 401(k) is included in “Wages, tips, other compensation” reported in W-2 Box 1.
Roth 401(k) contributions are reported on your W-2 form in Box 12. They are identified by Code AA. This reporting provides the IRS with information about your designated Roth contributions. A key advantage of Roth contributions is that qualified withdrawals in retirement are tax-free, as taxes were paid upfront.