Understanding Your W-2, Box by Box

Your W-2 is the one-page summary your employer sends by January 31 of everything you earned last year and everything they withheld. It looks dense, but only a handful of boxes actually matter for filing. Here's what each one means, and why the first number is almost never your salary.

Box 1 — Wages, tips, other compensation

This is your taxable wages for federal income tax, and it's usually lower than your gross salary. The reason: pre-tax deductions — traditional 401(k) contributions, health/dental/vision premiums, HSA and FSA money — are subtracted before Box 1 is calculated. So if you made $70,000 but put $7,000 into a traditional 401(k) and $2,000 toward pre-tax health premiums, Box 1 reads closer to $61,000. That gap is not an error — it's the tax break working. If you want to see how those pre-tax dollars change take-home, the 401(k) per-paycheck calculator shows the trade-off.

Box 2 — Federal income tax withheld

The total federal income tax your employer sent to the IRS on your behalf all year. This is withholding, not your final tax bill — when you file, your actual tax is calculated and this number is credited against it. Too much withheld means a refund; too little means you owe. If you consistently owe or over-refund, the fix is your W-4, and the W-4 extra withholding calculator helps you dial it in.

Boxes 3–6 — Social Security and Medicare

These are the FICA boxes. Box 3 is your Social Security wages and Box 5 is your Medicare wages — and here's the twist: they're oftenhigher than Box 1. Pre-tax 401(k) contributions lower your income-tax wages (Box 1) but not your Social Security and Medicare wages, because those taxes apply to that money anyway. Box 4 is the Social Security tax withheld (6.2% of Box 3, up to the annual wage cap) and Box 6 is Medicare tax (1.45% of Box 5, no cap). We break down exactly how those two taxes work in FICA, explained.

Box 12 — the codes that trip people up

Box 12 uses letter codes for specific amounts, and they're worth knowing:Code D is your traditional 401(k) contributions,Code DD is the total cost of your employer health coverage (informational only — it's not taxable and not a deduction),Code W is HSA contributions, and Code AA/BB/EEare Roth contributions to a workplace plan. Code DD surprises people every year because the number is large — but it's just showing you what your health insurance really costs, most of which your employer pays. That full picture of pay plus benefits is what the total compensation calculator adds up.

Boxes 15–20 — state and local

These repeat the story at the state and local level: state wages, state income tax withheld, and any local or city tax. If you moved or worked in more than one state, you may see multiple rows here, and you'll likely file in each. Nothing to fix — just make sure every W-2 you received is accounted for before you file.

Before you file: a two-minute check

Compare your W-2 Box 1 against your final pay stub of the year — the year-to-date taxable wages should match. If they don't, ask payroll before you file, not after. And if your last paycheck itself looked off all year, the paycheck checker rebuilds what your take-home should have been from your rate and deductions, so you can catch a payroll error while it's still easy to fix. A W-2 is only as right as the paychecks that fed it.