What Is Other Cafe 125 on Your W2?

A Wage and Tax Statement, commonly known as a W2, is a document employers provide annually that reports an employee’s wages and the taxes withheld from them. Box 14 on this form is often used by employers to report additional tax or income information not found in other designated boxes. Among the various entries that might appear in Box 14, “Other Cafe 125” is a frequent source of confusion for many individuals receiving their W2. This specific entry relates to certain employee benefits and has implications for your overall tax situation.

Understanding Cafeteria Plans

A cafeteria plan, also referred to as a Section 125 plan, is an employer-sponsored benefit program allowing employees to choose between receiving cash or certain qualified benefits. Employees can pay for these benefits with pre-tax dollars. This reduces an employee’s taxable income, as the money allocated to these benefits is not subject to federal income tax, Social Security tax, or Medicare tax.

Benefits typically offered under a Section 125 plan include health insurance premiums, flexible spending accounts (FSAs) for healthcare or dependent care expenses, and sometimes group-term life insurance. Employees make their benefit selections, and the corresponding contributions are deducted from their pay before taxes are calculated. This pre-tax treatment effectively lowers the cost of these services.

Decoding ‘Other Cafe 125’ on Your W2

The “Other Cafe 125” entry in Box 14 of your W2 represents the total pre-tax contributions you made to a Section 125 Cafeteria Plan that are not itemized elsewhere on the form. While some pre-tax deductions like health insurance premiums might be reported in other boxes or have specific codes in Box 12, “Other Cafe 125” captures a broader category of these contributions. This could include amounts contributed to a Health Savings Account (HSA), a Health Flexible Spending Account (FSA), or a Dependent Care Flexible Spending Account (DCFSA).

Employers include this information in Box 14 because the amounts have already been excluded from your taxable wages reported in Box 1. The Internal Revenue Service (IRS) does not provide a standard list of codes for Box 14, allowing employers to use their own descriptions. Therefore, “Other Cafe 125” serves as a catch-all for various pre-tax benefits elected under a Section 125 plan.

How ‘Other Cafe 125’ Affects Your Taxes

The presence of “Other Cafe 125” on your W2 indicates that your taxable income has already been reduced by these pre-tax contributions. These amounts are deducted from your gross pay before the calculation of federal income tax, Social Security tax, and Medicare tax. Consequently, the wages reported in Box 1 (Wages, Tips, Other Compensation), Box 3 (Social Security Wages), and Box 5 (Medicare Wages) of your W2 are lower than your gross salary.

This reduction in reported wages translates into a lower tax liability. By participating in a Section 125 plan, you pay less in federal income tax, and often less in state income tax, as well as Social Security and Medicare taxes. The “Other Cafe 125” amount reflects the portion of your earnings that has bypassed these taxes, making your benefit dollars go further.