On most W-2s, Box 5 (Medicare wages and tips) is larger than Box 1 (federal income tax wages), and that gap is normal. It exists because certain items — most commonly your traditional 401(k) contributions — are exempt from federal income tax but still subject to Medicare tax. The two boxes are measuring the same paycheck against two different tax rules, so comparing W-2 Box 1 vs Box 5 is really a question of which pre-tax deductions Congress carved out for which tax.
What Each Box Actually Reports
Box 1 is the compensation your employer paid you that is subject to federal income tax: salary, hourly wages, bonuses, commissions, and taxable fringe benefits, after subtracting the deductions that reduce income tax. This is the figure that flows onto Form 1040, Line 1a.1Internal Revenue Service. Form 1040
Box 5 is the compensation subject to the Medicare portion of FICA. You and your employer each pay 1.45% on that amount.2Internal Revenue Service. Topic No 751, Social Security and Medicare Withholding Rates Medicare wages have no annual ceiling, unlike the Social Security wages in Box 3.3Social Security Administration. Contribution and Benefit Base
The two boxes start from the same gross pay. They diverge because the list of pre-tax deductions the government allows for income tax is longer than the list it allows for Medicare tax.
Why Box 5 Is Usually Higher
A handful of items are excluded from federal income tax but not from FICA. Each one shrinks Box 1 without shrinking Box 5, opening a gap.
Traditional 401(k) and Similar Pre-Tax Deferrals
This is the reason for the gap on most W-2s. Employee deferrals into a traditional 401(k), 403(b), governmental 457(b), SIMPLE plan, or the federal Thrift Savings Plan are left out of Box 1. The same contributions are fully subject to Social Security and Medicare taxes, so they stay in Box 5.4Internal Revenue Service. Retirement Plan FAQs Regarding Contributions If you deferred $15,000 into a traditional 401(k) and nothing else drives a difference, Box 5 will exceed Box 1 by exactly $15,000.
Employer Adoption Assistance
Qualified adoption assistance from your employer is excluded from your gross income for income tax purposes but stays subject to FICA. It appears in Box 5, not in Box 1, and your employer reports the amount in Box 12 with Code T.5Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
Non-Qualified Deferred Compensation
For executive deferred compensation plans, FICA is generally due when the compensation vests, but income tax isn’t owed until the money is actually paid out. That timing mismatch can put an amount into Box 5 years before it lands in Box 1.
Deductions That Don’t Create a Gap
Some common payroll deductions reduce both boxes equally, so they don’t explain any difference between Box 1 and Box 5.
- Pre-tax health, dental, and vision premiums paid through a Section 125 cafeteria plan are excluded from income tax and from FICA.6Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
- Salary-reduction contributions to a health care or dependent care FSA get the same triple exclusion.
- HSA contributions run through a Section 125 arrangement are excluded from both boxes and reported in Box 12 with Code W.5Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
If you fund an HSA outside payroll, it doesn’t affect either box; you claim the deduction on Form 8889 instead.7Internal Revenue Service. About Form 8889, Health Savings Accounts (HSAs)
Roth Contributions Don’t Widen the Gap
Roth 401(k) and Roth 403(b) deferrals are made with after-tax dollars, so they are included in your gross income at the time of contribution.8Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts They stay in both Box 1 and Box 5. If all your retirement contributions are Roth and nothing else drives a difference, the two boxes will look nearly identical. The Roth tax break arrives at withdrawal, not on your W-2.
Reconciling the Two Numbers With Box 12
You can check the gap yourself. Box 12 uses letter codes to break out the specific dollar amounts that were excluded from Box 1 but not from Box 5:
- Code D — traditional 401(k) deferrals
- Code E — traditional 403(b) deferrals
- Code G — 457(b) deferrals
- Code S — SIMPLE plan salary-reduction contributions
- Code T — adoption assistance benefits
Add the relevant Box 12 entries. The total should equal, or come very close to, Box 5 minus Box 1.5Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 If the math works, the difference between your two boxes is legitimate. If it doesn’t, there may be a payroll error worth raising with your employer.
How Each Box Shows Up on Your Tax Return
Box 1 drives your federal income tax bill. It goes on Form 1040, Line 1a, and forms the basis of your adjusted gross income.1Internal Revenue Service. Form 1040 A lower Box 1 lowers your AGI, which can help you qualify for credits and deductions that phase out at higher incomes.
Box 5 usually does not appear on your 1040. Its main job is to let the IRS and the Social Security Administration confirm that the Medicare tax in Box 6 was calculated correctly and to record your earnings for benefit purposes.9Social Security Administration. Social Security and Medicare Tax Rates
Box 5 does show up directly in one situation: the Additional Medicare Tax. If your Medicare wages exceed $200,000 as a single filer or $250,000 for married filing jointly, you owe an extra 0.9% on the amount above the threshold.10Internal Revenue Service. Questions and Answers for the Additional Medicare Tax Employers must start withholding the surtax once an employee’s wages cross $200,000 in a calendar year regardless of filing status, which means a married couple below the joint threshold may need to reconcile the overwithholding on their return.11Internal Revenue Service. Instructions for Form 8959 (2025) Box 5 is the starting figure on Form 8959.
If the Numbers Still Don’t Add Up
Run the Box 12 reconciliation first. Many suspected errors turn out to be legitimate differences the employee didn’t expect. If the math still doesn’t work, ask your employer’s payroll department for a corrected W-2c. Employers are required to issue one as soon as they discover an error.12Social Security Administration. Helpful Hints to Forms W-2c/W-3c Filing
If your employer won’t respond and the corrected form hasn’t arrived by the end of February, you can call the IRS at 800-829-1040. As a last resort, you can file using Form 4852 as a substitute W-2 built from your pay stubs and other records.13Internal Revenue Service. Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R Save that option for when nothing else has worked, because a substitute return draws closer scrutiny.