Your W-2 form lists your gross income and all taxes withheld. It also lists your retirement contributions and health care costs paid for the year. The net pay listed on your W-2 after deductions is your take-home pay.
Voluntary Deductions and Health Care Costs
Voluntary deductions such as 401(k) or Thrift Savings Plan contributions may appear on your W-2. 401(k) and TSP contributions are usually made with pre-tax earnings, therefore reducing your taxable income. The contributions appear on your W-2 in Box 12, with the Code D. The contributions have already been deducted from your taxable income, so no further deductions or credits are available. Health care coverage provided to you by your employer appears in Box 12 with Code DD. The amount includes the combined total paid by the employer and you. The benefits are income tax free, so you won't need to report the amount as part of your income.
Although your W-2 reports the taxable portion of your income, you can still claim work-related deductions on your return. If you have unreimbursed job expenses, such as union dues or supplies, you can deduct these from your income to reduce your tax liability. If you traveled for work and paid for lodging or meals, you can also deduct those out-of-pocket expenses. You won't be able to deduct your portion of the health care offered through your employer, but you can deduct Medicare Part B, C and D premiums you may have paid. If your taxable income is over $100,000 or you want to itemize your deductions, you'll need to use Form 1040. If your income is less than $100,000 or you're not itemizing your deductions, use Form 1040A instead.
- Harvard University - Financial Administration: Understand Your W2 Wages
- Wellmark: The Affordable Care Act's Impact to W2 Reporting
- Daily Finance: W-2 Forms - Understanding Your Most Important Tax Document
- Nolo: Can You Deduct Unreimbursed Job Expenses?
- IRS: Topic 352 - Which Form – 1040, 1040A or 1040EZ?