The dollar figure next to Code DD on your W-2 is the total cost of your employer-sponsored health coverage for the year — your employer’s share plus your share, added together. It sits in Box 12 for information only. It does not add to your taxable wages, does not change what you owe, and does not need to be reported anywhere else on your Form 1040.1Internal Revenue Service. Reporting Employer-Provided Health Coverage on Form W-2 If the number looks startlingly large, that’s normal. Family coverage often runs into five figures, and seeing $20,000 or more there is common when the employer picks up a significant share of the premium.
What the Number Includes
Code DD aggregates every dollar paid for your employer-sponsored group health plan during the calendar year, whether the money came from your employer, from your paycheck pre-tax, or from your paycheck after-tax.2Internal Revenue Service. IRS Notice 2012-9 – Reporting the Cost of Employer-Sponsored Health Coverage The bulk is the major medical, surgical, and hospital coverage. Dental and vision are folded in when they’re bundled into the same group health plan; standalone dental or vision plans that you can decline or that carry a separate premium generally stay out.3Internal Revenue Service. Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers Wellness programs, on-site clinics, and employee assistance programs get included when the employer charges a COBRA premium for that coverage, and are optional otherwise.4Internal Revenue Service. Form W-2 Reporting of Employer-Sponsored Health Coverage
What Stays Out
Several health-related benefits are excluded from the Code DD figure:
- Health Savings Account contributions, which appear separately under Code W in Box 12.5Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
- The portion of a health FSA funded by your own pre-tax salary reduction. The 2026 maximum employee salary reduction for a health FSA is $3,400.5Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
- Long-term care insurance, which the ACA specifically carved out of the reporting requirement.
- Supplemental accident, disability, or specific-disease policies.2Internal Revenue Service. IRS Notice 2012-9 – Reporting the Cost of Employer-Sponsored Health Coverage
Why It Doesn’t Increase Your Tax
The Code DD figure isn’t in Box 1 (wages), Box 3 (Social Security wages), or Box 5 (Medicare wages). It’s parked in Box 12 precisely because it isn’t taxable compensation. Two long-standing rules keep it that way. Federal law excludes employer-provided health coverage from an employee’s gross income outright.6Office of the Law Revision Counsel. 26 U.S.C. 106 – Contributions by Employer to Accident and Health Plans And the share you pay through pre-tax payroll deductions under a cafeteria plan is also excluded from gross income.7Office of the Law Revision Counsel. 26 U.S.C. 125 – Cafeteria Plans
The ACA reporting rule didn’t change those exclusions. It made the total visible so employees can see what their coverage actually costs. Nothing in Code DD is subject to federal income tax withholding or FICA. A large number means your health plan is expensive; it does not mean you owe anything.
The figure also has no effect on marketplace premium tax credit eligibility. Because it’s excluded from gross income entirely, it doesn’t feed into the adjusted gross income used to determine subsidies.
How to Enter It on Your Return
Type the Code DD amount into Box 12 of your return exactly as it appears on the W-2. Tax software recognizes the code and won’t route the number into any income line.1Internal Revenue Service. Reporting Employer-Provided Health Coverage on Form W-2 If you file by hand, there’s no separate calculation or adjustment — the Code DD amount isn’t reported anywhere on Form 1040. Enter it accurately anyway. The IRS matches W-2 data automatically, and mistyping a Box 12 entry can trigger correspondence even when the number doesn’t affect the tax you owe.
If the Number Looks Wrong
If Code DD looks off by a wide margin — for example, $2,000 for a plan you know costs $18,000 — contact your employer’s payroll or HR department. Employers issue a corrected W-2 (Form W-2c) when a previously filed W-2 contains errors, file it with the Social Security Administration, and provide you an updated copy.5Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 Because Code DD is informational, an incorrect amount here won’t cause you to overpay or underpay tax. The correction matters more for the employer’s compliance record than for your return, but flagging it can also surface broader payroll issues that could affect taxable items later.
If Code DD Is Blank
A missing Code DD does not mean anything is wrong with your coverage or your taxes. The IRS has broad transition relief that has stayed in effect since 2012, with no expiration announced as of early 2026.1Internal Revenue Service. Reporting Employer-Provided Health Coverage on Form W-2 Employers that filed fewer than 250 W-2 forms for the prior year are not required to report Code DD.4Internal Revenue Service. Form W-2 Reporting of Employer-Sponsored Health Coverage Employers contributing to multiemployer (union) health plans are also exempt, along with coverage provided through a Health Reimbursement Arrangement, standalone dental or vision plans, and certain self-insured plans not subject to COBRA.3Internal Revenue Service. Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers The IRS has committed to giving at least six months of advance notice before changing these exemptions. If you work for a smaller employer or receive coverage through a union plan, a blank Code DD is likely the reason.