What Is Box 18 on Your W-2 for Local Wages?
Understand Box 18 on your W-2. Clarify what local wages mean for your tax obligations and how to interpret these important entries.
The W-2 form, or Wage and Tax Statement, is a document individuals receive from their employers. It details earnings and withheld taxes, serving as a record for filing income tax returns. Understanding the information in each box is important for accurate tax reporting. This article focuses on Box 18, which reports local wages.
Understanding Box 18
Box 18 on your W-2 form is labeled “Local Wages, Tips, and Other Compensation.” This figure represents the total income your employer has determined is subject to local income taxes. This amount is for local tax purposes and does not directly relate to federal, Social Security, or Medicare tax calculations.
Box 18 typically includes regular wages, reported tips, bonuses, and other taxable compensation designated as taxable by a local government. It reflects the portion of your earnings a city, county, or other municipal authority considers taxable for their income tax.
Local Income Taxes and Your W-2
Local income taxes are levies imposed by local government entities, such as cities, counties, or school districts, on income. These taxes are distinct from federal and state income taxes and fund local public services and infrastructure. Not all areas impose local income taxes, which is why Box 18 might be blank for some individuals.
The amount in Box 18 is used by local tax authorities to determine an individual’s local tax liability. If an amount is present in Box 18, you will typically find a corresponding amount in Box 19, labeled “Local Income Tax,” showing the total local taxes withheld. Box 20 specifies the name of the locality to which these taxes apply.
Distinguishing Box 18 from Other Wage Information
The amount in Box 18, “Local Wages, Tips, and Other Compensation,” often differs from the figures reported in other wage boxes on the W-2, such as Box 1 (Federal Wages, Tips, Other Compensation), Box 3 (Social Security Wages), and Box 5 (Medicare Wages). These differences arise because each box is governed by different tax rules, limits, and deductible amounts. For example, pre-tax deductions like 401(k) contributions or health insurance premiums can reduce federal taxable wages (Box 1) but might not affect Social Security or Medicare wages (Boxes 3 and 5), or local wages (Box 18), depending on the specific tax laws.
Box 1 reports your taxable wages for federal income tax purposes, incorporating wages, tips, bonuses, and taxable fringe benefits, after accounting for pre-tax deductions like 401(k) contributions. In contrast, Box 3 (Social Security Wages) and Box 5 (Medicare Wages) typically reflect gross earnings before many pre-tax deductions. Social Security wages are subject to an annual wage cap, while Medicare wages are not. Box 18 is tailored to the definitions and rules set by local tax jurisdictions.
What to Do About Box 18 Entries
If Box 18 on your W-2 is blank, it generally means you do not live or work in an area with local income taxes, or your employer is not required to withhold them. Many individuals will have a blank Box 18.
If you believe the amount in Box 18 is incorrect, or if you expected local wages to be reported but the box is blank, contact your employer’s payroll or human resources department. They can clarify or issue a corrected W-2 if an error occurred. Should Box 18 contain an amount, but Box 19 (local tax withheld) is blank, it may indicate that your employer reported the wages but did not withhold local tax, or that local tax payment is your responsibility. If you believe you are not subject to local taxes despite an amount in Box 18 (e.g., due to a change in residence), it is advisable to consult local tax regulations or seek guidance from a tax professional.