Does Employer-Paid Health Insurance Go on Your W-2?

Yes, employer-paid health insurance does go on your W-2, but it sits in an informational box and is not added to your taxable income. You’ll find the figure in Box 12 next to Code DD. It reflects the full annual cost of your group health coverage, and it does not increase your federal income tax, Social Security tax, or Medicare tax.¹

Where It Shows Up on the W-2

Box 12 is a multipurpose section of the W-2 that uses letter codes to flag different kinds of compensation and benefits. Code DD is the one reserved for the aggregate cost of your employer-sponsored health plan.²

The dollar amount next to Code DD is the total cost of coverage, not just what your employer kicked in. It combines the employer’s contribution with any portion you paid through pre-tax payroll deductions. If your plan’s annual premium is $18,000 and $4,000 of that came out of your paycheck pre-tax, the full $18,000 is what appears. After-tax employee contributions are generally not included.²

The number also covers anyone enrolled with you, including a spouse or dependents on your employer’s plan. If you changed tiers partway through the year or left the company mid-year, the amount is prorated for the period you were actually covered.

Why the Code DD Amount Is Not Taxable

Seeing $15,000 or $20,000 next to your name can be startling, and plenty of employees assume they owe tax on it. You don’t. The reporting exists for transparency, and the IRS has stated plainly that putting the cost of coverage on the W-2 does not make the coverage taxable.³

The underlying rule is Internal Revenue Code Section 106, which excludes employer-provided coverage under an accident or health plan from the employee’s gross income.⁴ Because of that exclusion, the Code DD amount is left out of Box 1 (federal taxable wages), Box 3 (Social Security wages), and Box 5 (Medicare wages), and nothing is withheld against it.

When you fill out your Form 1040, don’t add the Code DD figure to your income. Tax software handles this correctly in almost every case, but it’s worth a glance if you file by hand or review a preparer’s draft to confirm the number stayed out of the taxable wage calculation.

What Code DD Does Not Include

Code DD is narrower than people often assume. Standalone dental and vision plans that aren’t bundled into your major medical coverage are left out. If dental or vision is integrated into the medical plan, those costs do get folded in.³

Several other benefits are also excluded from the Code DD total and either show up elsewhere on the W-2 or not at all:

Health Savings Account contributions, which are reported separately under Code W.
Archer MSA contributions, which follow their own reporting rules.
Long-term care insurance premiums.
Coverage provided through a multiemployer plan.
Health Flexible Spending Account salary-reduction contributions, which simply reduce your taxable wages in Boxes 1, 3, and 5.¹

If your employer uses a Qualified Small Employer Health Reimbursement Arrangement instead of a group plan, the permitted annual benefit shows up in Box 12 under Code FF rather than Code DD. The figure reflects what you were entitled to receive for the year, not what you actually claimed.⁵

When Employer-Paid Coverage Does Become Taxable

The default is that employer-paid coverage is tax-free. A handful of situations change that, and in those cases the premium cost moves out of the informational Box 12 line and into the actual taxable wages in Box 1.

More-Than-2% S-Corporation Shareholders

If you own more than 2% of an S-corporation’s stock and the company pays your health insurance premiums, those premiums are added to your Box 1 wages and treated as taxable income for federal income tax purposes.⁶ The 2% threshold includes anyone who owns more than 2% of outstanding stock or more than 2% of total combined voting power.

The premiums are not subject to Social Security or Medicare taxes, so they stay out of Boxes 3 and 5.⁶ You can generally claim an offsetting self-employed health insurance deduction for the same amount on Schedule 1 (Form 1040), Line 17, calculated on Form 7206.⁷ The deduction can’t exceed your earned income from the S-corporation, and you can’t claim it for any month you were eligible to participate in a subsidized health plan through another employer, including a spouse’s.⁸

Coverage for Domestic Partners and Non-Dependents

If your employer covers someone who isn’t your spouse or tax dependent under the Internal Revenue Code, the fair market value of that person’s coverage becomes imputed income to you. This commonly comes up with domestic partners and their children. The value is added to Box 1, Box 3, and Box 5, so you’ll owe federal income tax plus Social Security and Medicare taxes on it.

If the covered person actually qualifies as your tax dependent, the normal exclusion applies and no extra tax is owed. The distinction turns on the IRS definition of “dependent,” not on your employer’s benefits eligibility rules. Your employer might cover a domestic partner as a matter of company policy, but the tax code only cares whether that person meets the dependency criteria.

Discriminatory Self-Insured Plans

Self-insured plans, where the employer pays claims directly rather than through an insurer, must pass non-discrimination tests under IRC Section 105(h). If a plan fails those tests, the “excess reimbursement” paid to highly compensated employees loses its tax-free status and becomes taxable income.⁹ A highly compensated individual for this purpose means one of the five highest-paid officers, a shareholder owning more than 10% of the company’s stock, or someone in the highest-paid 25% of all employees. The rule applies only to self-insured arrangements.

Cash Wellness Incentives

Employer wellness programs that pay cash, gift cards, or other cash equivalents are taxable wages. The IRS has made clear there is no de minimis exception for cash or cash-equivalent wellness rewards. Even a small gift card counts as taxable compensation, reported in Box 1 and subject to income tax withholding, Social Security, and Medicare taxes. Premium discounts or reduced cost-sharing tied to wellness participation are treated differently from cash payouts.

What If Your W-2 Has No Code DD Entry?

The Code DD reporting requirement applies to employers that filed 250 or more W-2 forms for the preceding calendar year.³ Smaller employers can report voluntarily, but they aren’t penalized for leaving the box blank.

If you work for a smaller company and don’t see a Code DD figure, it doesn’t mean you lack coverage or that something went wrong on your W-2. It just means your employer isn’t required to report the cost. Your coverage, and its tax-free status, is unaffected.

If the Code DD Number Looks Wrong

Because Code DD is informational, an error there won’t change what you owe. Still, it’s worth asking your payroll or HR department to look at it, since employers correct W-2 mistakes by filing Form W-2c and sending you an updated copy.¹⁰ The time to take a correction seriously is when the underlying mistake touches Box 1, which happens with things like S-corp shareholder premiums or domestic partner imputed income. In those cases a corrected W-2 can change your tax liability, and you may need to file an amended return on Form 1040-X.

1
Internal Revenue Service. Reporting Employer-Provided Health Coverage on Form W-2
2
IRS. 2026 General Instructions for Forms W-2 and W-3
3
Internal Revenue Service. Form W-2 Reporting of Employer-Sponsored Health Coverage
4
Office of the Law Revision Counsel. 26 USC 106 – Contributions by Employer to Accident and Health Plans
5
Internal Revenue Service. Qualified Small Employer Health Reimbursement Arrangements Notice 2017-67
6
Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues
7
Internal Revenue Service. Instructions for Form 7206 (2025)
8
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
9
Office of the Law Revision Counsel. 26 USC 105 – Amounts Received Under Accident and Health Plans
10
IRS. Form W-2c (Rev. January 2026) Corrected Wage and Tax Statement