The W2 form reveals more than just wages. Learn how to locate and understand the reported cost of your employer-sponsored health coverage. --- The W2 form reveals more than just wages. Learn how to locate and understand the reported cost of your employer-sponsored health coverage.
A W2 form, or Wage and Tax Statement, is an annual document employers issue to report an employee’s wages, salary, and other compensation, along with federal, state, and local taxes withheld. This form is essential for filing income tax returns, as it summarizes an individual’s earnings and tax payments for the calendar year. Beyond reporting income and tax withholdings, the W2 also includes other financial details, such as contributions to retirement plans and information regarding health insurance premiums. This article will guide you through locating and understanding health insurance premium information on your W2 form.
To find the reported cost of your employer-sponsored health coverage, direct your attention to Box 12 of your W2 form. Box 12 often contains multiple sub-boxes, labeled 12a, 12b, 12c, and 12d. Each sub-box displays a specific letter code followed by an associated dollar amount.
Within one of these Box 12 sub-boxes, look for “Code DD.” This code is designated for reporting the “Cost of employer-sponsored health coverage.” The amount listed directly next to “DD” represents the total cost of your health coverage for the year. For example, it will appear in the format “DD XXXXX.XX,” indicating the reported cost in dollars and cents.
The amount displayed next to Code DD in Box 12 represents the total cost of your employer-sponsored health coverage. This figure includes both the portion of the premium paid by your employer and any amount you contributed through pre-tax payroll deductions.
This reported amount is for informational purposes only. The value shown under Code DD is not considered taxable income to you as an employee. Consequently, it does not affect the taxable wages reported in Box 1 of your W2 or increase your tax liability. This information can be useful for personal financial planning and understanding your compensation.
The requirement for employers to report the cost of health coverage on W2 forms stems from the Affordable Care Act (ACA). This mandate was implemented to increase transparency regarding healthcare costs. By providing this information, employees gain a clearer understanding of the total financial value of their health benefits.
This reporting also helps the government collect data on the overall cost of health care coverage across the United States. This aggregated data can be utilized for various analyses and policy considerations related to healthcare spending. The goal is to inform and provide a comprehensive picture of health coverage expenses.