employer’s benefit plan
SEC 125 is your employer’s benefit plan. It is also known as a “cafeteria plan”. Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you can not deduct them as medical expenses.
Is Section 125 pre tax?
Section 125 is the section of the IRS tax code where the items that can be deducted from employee pay on a pre-tax basis are defined. In the context of Section 125, “pre-tax” means that a deduction is exempt from Federal Income Tax Withholding, Social Security and Medicare Taxes.
How is Section 125 deducted on a W-2?
If you’re enrolled in your employer’s Section 125 benefit plan, your premiums are deducted from your wages on a pretax basis, which gives you a tax break. The taxable wages boxes on your annual W-2 form show only your wages from which taxes were deducted; this doesn’t apply to Section 125 contributions.
Where is the S125 box on a W-2?
The taxable wages boxes on your annual W-2 form show only your wages from which taxes were deducted; this doesn’t apply to Section 125 contributions. If your employer has enrolled you in a S125 plan, they may notate this on box 14 of your W-2 using the term “S125.”
What do the W2 boxes and codes mean?
The W2 boxes and codes show the wages you’ve earned and any taxes paid through withholding. To help you understand your Form W2, we’ve outlined each of the W-2 boxes and the corresponding W2 box codes below.
Why is Cafe 125 not included on W2?
Taxes on wages, such as withholding, Medicare and Social Security, are not charged on cafeteria plan items. For this reason, cafeteria plan benefits are not included on the W2 in Box 1, which is reserved for wages. Because they are not taxed, you also won’t find the Café 125 plan included in Box 3 for Social Security, or Box 5 for Medicare.
