Does W-2 Wages Include 401k Contributions?

The W-2 form, or “Wage and Tax Statement,” summarizes an employee’s annual wages and withheld taxes. Employers provide this document to employees and the IRS each year. Understanding how different types of income and deductions, such as 401(k) contributions, are reported on this form is important for accurate tax filing. The W-2 serves as a comprehensive record for both federal and state income tax purposes.

How 401(k) Contributions Appear on Your W-2

When you contribute to a 401(k) retirement plan, these amounts are reflected on your W-2 form. Pre-tax 401(k) contributions are typically excluded from Box 1, “Wages, tips, other compensation.” This reduces your taxable income for federal purposes, deferring income tax until retirement.

Social Security and Medicare taxes are reported differently. Both pre-tax and Roth 401(k) contributions are included in Box 3, “Social Security wages,” and Box 5, “Medicare wages and tips.” These contributions remain subject to Social Security and Medicare taxes, even if they reduce federal taxable income. The Social Security tax applies up to an annual wage base limit, while the Medicare tax applies to all wages without a limit.

Box 12 of the W-2 form provides specific details about your 401(k) contributions. This box contains a single letter or a two-letter code followed by a dollar amount. Code D is used for pre-tax contributions, while Code DD is used for Roth contributions. Box 12 serves an informational purpose, allowing the IRS to track your contributions, but the amounts reported here do not directly affect the taxable wages shown in Box 1.

Understanding Pre-Tax and Roth 401(k) Reporting

Pre-tax 401(k) contributions reduce your current taxable income. These amounts are subtracted from your gross pay before Box 1 wages are calculated. For example, if your gross pay is $50,000 and you contribute $5,000 to a pre-tax 401(k), your Box 1 wages would reflect $45,000, assuming no other adjustments. This contribution is identified in Box 12 with Code D. The tax benefit of pre-tax contributions is realized upfront, as you pay income tax on these funds only when they are withdrawn in retirement.

Roth 401(k) contributions operate differently regarding their tax treatment on your W-2. These contributions are made with after-tax dollars, meaning they do not reduce your current taxable income. Therefore, Roth 401(k) contributions are included in your Box 1 wages, as federal income tax has already been withheld or paid on these amounts. The total amount of your Roth 401(k) contributions is reported in Box 12, identified by Code DD. This code signifies designated Roth contributions, which are generally eligible for tax-free withdrawals in retirement, provided certain conditions are met.

Employer Contributions and Your W-2

Employer contributions to your 401(k) plan, such as matching or profit-sharing contributions, are generally not included in your taxable wages on the W-2 form. These amounts are not reported in Box 1, Box 3, or Box 5. This is because employer contributions are considered tax-deferred income; you do not pay income tax on them in the year they are contributed.

Employer contributions are also not listed in Box 12 of your W-2. Box 12 is primarily designated for reporting employee deferrals, such as your own pre-tax or Roth contributions. While employer contributions are a valuable part of your compensation package and grow tax-deferred within your 401(k) account, they are not reflected on your W-2. You will pay taxes on these amounts only when you withdraw them from your retirement account during retirement.