What Is Code E in Box 12a of Your W-2?

Your annual Form W-2 provides a comprehensive summary of your earnings and the taxes your employer withheld throughout the year. While boxes detailing total wages and federal income tax are straightforward, the various codes in Box 12 can require more explanation. These codes represent specific types of compensation and benefits that are treated differently for tax purposes. Understanding these codes is a part of correctly preparing your income tax return.

Defining Code E in Box 12a

The amount appearing next to Code E in Box 12a of your W-2 signifies the total elective deferrals you made to a Section 403(b) retirement plan during the calendar year. These are pre-tax contributions, meaning the funds were deducted from your paycheck before federal and most state income taxes were calculated. Consequently, this amount has already been excluded from the taxable wages reported in Box 1 of your W-2.

A 403(b) plan is a type of retirement savings plan available to employees of public schools, certain non-profit organizations, and ministers. It functions similarly to the more common 401(k) plan, allowing employees to save for retirement on a tax-deferred basis. The figure in Box 12a with Code E is informational, confirming the amount you contributed to your plan.

Impact on Your Federal Tax Return

Although the amount designated by Code E is not subject to income tax for the year, it plays an important role in determining your eligibility for certain tax benefits. Specifically, this contribution amount is used to see if you qualify for the Retirement Savings Contributions Credit, often called the Saver’s Credit. This credit is designed to help mid- and low-income taxpayers offset the cost of saving for retirement.

Eligibility for the Saver’s Credit depends on your adjusted gross income (AGI), filing status, and a few other conditions. For the 2024 tax year, the AGI limits are $76,500 for married couples filing jointly, $57,375 for heads of household, and $38,250 for single filers. To qualify, you must also be at least 18 years old, not claimed as a dependent on someone else’s return, and not have been a full-time student for any part of five calendar months during the year.

The credit is calculated as a percentage—50%, 20%, or 10%—of the first $2,000 you contribute ($4,000 if married filing jointly). The percentage you can claim depends on your specific AGI, with lower incomes qualifying for a higher percentage. For example, a single filer with an AGI of $23,000 or less in 2024 could get a credit of 50% of their contribution. This nonrefundable credit can reduce your tax liability dollar-for-dollar.

Claiming the Retirement Savings Contributions Credit

To claim the Saver’s Credit, you must complete and file IRS Form 8880, Credit for Qualified Retirement Savings Contributions. You will transfer the amount from your W-2, Box 12a with Code E, to the appropriate line on Form 8880. This form walks you through the calculation to determine the exact amount of your credit based on your contributions and AGI.

The result from Form 8880 is then entered on Schedule 3 (Form 1040), which is used for various additional credits and payments. The total from Schedule 3 is then carried over to your main Form 1040, directly reducing the amount of tax you owe. It is a direct way your 403(b) contributions can lower your current year’s tax bill.