Taxable wages and W-2 boxes (2026)

What are taxable wages on a W-2? Your W-2 shows three wage figures because each tax counts wages differently. Box 1 is wages for federal income tax, after pre-tax 401(k) and benefit deductions. Box 3 is wages for Social Security tax, capped at the wage base. Box 5 is wages for Medicare tax, with no cap.

Why one salary, three wage numbers

Open your W-2 and you will find three different wage amounts in Boxes 1, 3 and 5 — often none of them equal to your salary. That is not an error. Federal income tax, Social Security and Medicare each have their own definition of “taxable wages”, and your pre-tax benefits affect each one differently.

Understanding this explains why your gross pay, your taxable wages and the amount of tax withheld all differ, and why contributing to a 401(k) lowers your income tax but not your FICA tax.

Boxes 1, 3 and 5

W-2 box	What it measures	Reduced by 401(k)?	Reduced by Section 125 health / HSA?	Capped?
Box 1	Wages for federal income tax	Yes	Yes	No
Box 3	Wages for Social Security tax	No	Yes	Yes — wage base ($184,500 in 2026)
Box 5	Wages for Medicare tax	No	Yes	No

Section 125 (“cafeteria plan”) benefits such as health premiums and payroll HSA contributions are excluded from all three. Traditional 401(k) deferrals are excluded only from Box 1, which is why Boxes 3 and 5 are usually higher than Box 1.

Worked example: an $80,000 salary

A single filer earns $80,000 and puts $6,000 into a traditional 401(k), $3,000 into health premiums and $2,000 into an HSA through payroll. The wage boxes would show:

Item	Amount
Gross pay	$80,000
− 401(k) deferral	−$6,000
− Health premium and HSA (Section 125)	−$5,000
Box 1 — federal income tax wages	$69,000
Box 3 — Social Security wages	$75,000
Box 5 — Medicare wages	$75,000

Box 1 wages $69,000 (86.3%)
401(k) $6,000 (7.5%)
Health + HSA $5,000 (6.3%)

How $80,000 of gross pay splits into pre-tax deductions and Box 1 wages

The same worker would see Box 12 code D for the 401(k) deferral. Figures come from this site's calculator; test your own in the paycheck calculator.

The tax boxes: 2, 4 and 6

Box 2 — federal income tax withheld during the year (FITW).
Box 4 — Social Security tax withheld: $4,650 in this example, which is 6.2% of Box 3.
Box 6 — Medicare tax withheld: $1,088, which is 1.45% of Box 5, plus 0.9% on wages over $200,000.
Boxes 15–17 — state wages and state income tax withheld, where your state taxes wages.

A quick check: Box 4 divided by Box 3 should be 6.2%, and Box 6 divided by Box 5 should be about 1.45%. See how withholding works for the bigger picture.

Box 12 codes you will often see

D — elective deferrals to a traditional 401(k).
W — employer contributions to your HSA, including amounts you put in through payroll under a cafeteria plan.
DD — the total cost of employer-sponsored health coverage. It is informational and not taxable.
AA / BB — Roth 401(k) and Roth 403(b) contributions, which do not reduce Box 1.

Why wages differ from your salary

Beyond pre-tax deductions, wage boxes can differ from your salary because of a raise or bonus mid-year, unpaid time off, taxable fringe benefits (such as imputed life insurance over $50,000), tips, and the Social Security cap on Box 3 for high earners. Box 3 never exceeds the wage base for the year, while Box 5 keeps counting every dollar.

Checking your W-2

Compare Box 1 with your final pay stub's year-to-date taxable wages.
Confirm Box 3 is not above the wage base and that Boxes 4 and 6 match 6.2% and 1.45%.
Make sure your name, Social Security number and state boxes are correct.
Ask your employer for a corrected W-2c if anything is wrong before you file. This is general information, not tax advice.

Frequently asked questions

Why is Box 1 on my W-2 lower than my salary?

Box 1 shows wages subject to federal income tax. Pre-tax 401(k) deferrals, health premiums under a Section 125 plan and HSA contributions through payroll are subtracted, so Box 1 is usually lower than gross pay.

Why are Boxes 1, 3 and 5 different?

Different taxes use different wage definitions. 401(k) deferrals reduce Box 1 but not Box 3 or Box 5. Section 125 benefits reduce all three. Box 3 also stops at the Social Security wage base.

What is the Social Security wage base?

It is the maximum amount of wages subject to Social Security tax in a year: $184,500 for 2026. The W-2 you receive for 2025 uses the 2025 base, which was $176,100.

What does Box 12 code D mean?

Code D reports your elective deferrals to a traditional 401(k). It is informational and also explains why Box 1 is lower than Boxes 3 and 5.

Which number do I use to file my taxes?

Use the figures exactly as printed on your W-2. Box 1 goes on your federal return as wages; Boxes 2, 4 and 6 are tax already paid.