The “Sec 125” line in Box 14 of your W-2 is the total amount your paycheck contributed to pre-tax benefits through your employer’s Section 125 cafeteria plan during the year. That money was already subtracted from the taxable wages reported in Box 1, so for most federal filers there is nothing to do with it. It exists on the form as a record, mainly so you can reconcile your pay stubs and so certain states can tax it back if they don’t follow the federal exclusion.
What the Amount Represents
Section 125 of the Internal Revenue Code lets employers offer you a choice between taking pay as cash or redirecting it to certain benefits before taxes are calculated.1Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans When you elect a qualifying benefit, that money leaves your gross pay before federal income tax, Social Security tax, and Medicare tax are withheld.2Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
The Box 14 total typically covers your share of:
- Health, dental, and vision insurance premiums
- Health Flexible Spending Account contributions
- Health Savings Account contributions made through payroll
- Group-term life insurance up to plan limits
- Adoption assistance
Employers label the line differently. You might see “Sec 125,” “Cafe 125,” “Section 125,” or the individual benefits broken out like “Health Premium” and “FSA.” All of them describe the same category of pre-tax deductions.
Do You Enter It Anywhere on Your Federal Return?
No. The dollars in Box 14 Sec 125 were already excluded from Box 1 wages before your W-2 was printed.2Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans Deducting them again on Form 1040 would double-count the benefit.
Tax software will still ask you to type in what Box 14 shows. That’s normal. The software recognizes Section 125 labels and treats the amount as informational, not as an additional adjustment to your federal income.
Box 14 itself is optional for employers. IRS instructions describe it as space an employer “may use” for any other information, with each item labeled.3Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026) Most employers report cafeteria plan totals here because it helps employees verify their pay and gives state tax authorities a number to work with.
Check It Against Your Last Pay Stub
Before you file, add up the per-paycheck cafeteria plan deductions on your final pay stub of the year and compare the total to the Box 14 amount. They should match. If they don’t, contact payroll before filing. A mismatch sometimes points to an error in Box 1 wages as well, and that would change what you actually owe.
When the Number Matters for State Taxes
Not every state follows the federal Section 125 exclusion. In states with partial or no conformity, your state taxable wages are higher than your federal Box 1 wages, and Box 14 is where the state return picks up the difference.
New Jersey, for example, generally does not allow the Section 125 exclusion for benefits funded through salary reduction agreements. Pennsylvania excludes health-related cafeteria plan benefits but taxes others, such as dependent care contributions. If you file in one of those states, the instructions will direct you to add some or all of the Box 14 amount back to your state income. That state add-back is the reason many employers report the figure in the first place.
Dependent Care Is Reported Elsewhere
If you funded a Dependent Care Assistance Program through your cafeteria plan, that amount belongs in Box 10, not Box 14.4Internal Revenue Service. Employee Reimbursements, Form W-2, Wage Inquiries Some employers also mirror the dependent care figure in Box 14 with a label like “DCAP,” but Box 10 is the official location and the one your return will ask about.
Dependent care benefits are not silent the way health premiums are. You file Form 2441 with your federal return to reconcile them. The maximum you can exclude through a DCAP is $5,000 per year, or $2,500 if married filing separately.5Internal Revenue Service. Instructions for Form 2441 (2025) Amounts above the limit should already be folded back into Box 1 wages.4Internal Revenue Service. Employee Reimbursements, Form W-2, Wage Inquiries Part III of Form 2441 does the math. If Line 26 produces a positive number, that amount is taxable and moves to Form 1040, Line 1e.
A Change to Box 14 on 2026 W-2s
Starting with 2026 W-2 forms, the IRS split Box 14 into Box 14a (“Other”) and Box 14b (“Treasury Tipped Occupation Codes”). Your Section 125 total will appear in Box 14a. Box 14b is only used by employers reporting tipped occupation codes.3Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026) The tax treatment of the amount doesn’t change; only the location on the form does.
The Social Security Trade-Off
Because Section 125 contributions come out before Social Security and Medicare taxes are calculated, they also reduce your Social Security and Medicare wages.6Social Security. Cafeteria Benefit Plans Lower credited earnings can mean a slightly smaller Social Security benefit down the road.
For most workers the immediate tax savings are much larger than the eventual benefit reduction. Someone deferring $3,000 a year in health premiums pre-tax saves roughly $230 annually in Social Security and Medicare taxes, and the effect on a 35-year earnings average is small. The trade-off is more relevant for higher earners near the Social Security wage base, where every dollar of credited earnings still counts toward the benefit formula.