Reading W-2 gross income means reading three numbers, not one. Boxes 1, 3, and 5 all report a version of your annual wages, and they rarely match. Box 1 is your federal taxable wages after pre-tax deductions come out. Box 3 is your Social Security wages, capped at $184,500 for 2026. Box 5 is your Medicare wages, which have no cap at all. Each figure exists because a different tax applies to a different slice of your pay.
Why Your W-2 Shows Three Different Wage Numbers
Your gross pay gets carved up before it lands on the form. Federal income tax, Social Security tax, and Medicare tax each have their own rules about which deductions reduce the wage base and which don’t. A traditional 401(k) contribution, for example, reduces the wages subject to federal income tax but not the wages subject to Social Security or Medicare tax. A health insurance premium paid through a cafeteria plan reduces all three. So the same paycheck can produce three different year-end totals depending on which tax you’re calculating.
Once you understand that, the W-2 stops looking like a form full of contradictions and starts looking like a summary of three parallel calculations. The rest is just knowing what belongs in each box.
Box 1: Federal Taxable Wages
Box 1, labeled “Wages, tips, other compensation,” is the number that drives your federal income tax bill. It includes base salary or hourly pay, commissions, bonuses, taxable tips, and certain fringe benefits. The cost of employer-provided group-term life insurance above $50,000 in coverage is included because the IRS treats the value of that excess coverage as taxable income.1Internal Revenue Service. Group-Term Life Insurance Non-cash prizes and awards also get included at fair market value.
Box 1 is usually lower than your actual gross pay. Traditional 401(k) contributions, health insurance premiums paid through a cafeteria plan, and other pre-tax deductions are subtracted before the number hits Box 1. If you contributed $10,000 to a traditional 401(k) on a $75,000 salary, Box 1 would show roughly $65,000 minus any other pre-tax deductions. The gap between the year-to-date gross on your final pay stub and Box 1 is those deductions working as intended.
One trap catches people: Roth 401(k) contributions are not subtracted from Box 1. Because Roth deferrals are made with after-tax dollars, they stay in your federal taxable wages even though they still reduce your take-home pay.2Internal Revenue Service. Retirement Plan FAQs Regarding Contributions If your Box 1 looks higher than you expected, check whether your retirement contributions were designated Roth.
Box 1 is the figure that determines your federal tax bracket. For 2026, brackets run from 10% on the first $12,400 of taxable income for single filers up to 37% on income above $640,600.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Box 3: Social Security Wages
Box 3 tracks wages subject to Social Security tax under the Federal Insurance Contributions Act. The employee portion is 6.2%, and it applies only up to an annual wage cap. For 2026, that cap is $184,500.4Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Every dollar you earn above that amount is exempt from Social Security tax, so Box 3 will never exceed $184,500 no matter how much you made.
Box 3 is often higher than Box 1. That seems backwards until you realize that most pre-tax retirement contributions, including traditional 401(k), 403(b), and similar deferrals, are still subject to Social Security tax even though they’re excluded from federal income tax.5Internal Revenue Service. 401(k) Plan Overview Health insurance premiums paid through a Section 125 cafeteria plan, on the other hand, are generally excluded from both Box 1 and Box 3.6Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
Box 5: Medicare Wages
Box 5 shows wages subject to Medicare tax. The employee rate is 1.45%, and unlike Social Security, there is no annual earnings cap.7Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Box 5 usually equals Box 3 for most workers. If you earned above the $184,500 Social Security cap, Box 5 will be higher because it captures your full compensation.
An additional 0.9% Medicare surtax applies to wages above a threshold that depends on filing status: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. Your employer must start withholding the extra tax once your wages pass $200,000 in a calendar year regardless of your filing status. If you’re married filing jointly with wages between $200,000 and $250,000, you may get a credit back when you file.8Internal Revenue Service. Topic No. 560, Additional Medicare Tax
How Pre-Tax Deductions Create the Gaps
The reason Boxes 1, 3, and 5 show different numbers comes down to which deductions reduce which tax base. Not every pre-tax deduction works the same way across all three boxes.
Traditional 401(k) and 403(b) contributions reduce Box 1 but not Boxes 3 or 5. For 2026, the standard elective deferral limit is $24,500, with an $8,000 catch-up for employees aged 50 and older. A higher catch-up of $11,250 applies if you’re between 60 and 63.9Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Those contributions lower your federal income tax now but remain subject to Social Security and Medicare taxes. When you withdraw the money in retirement, you’ll pay income tax on it then.
Health insurance premiums and flexible spending account contributions paid through a Section 125 cafeteria plan typically reduce all three boxes, because they’re generally exempt from both income tax and FICA taxes.6Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans Health Savings Account contributions made through payroll get the same triple exclusion. For 2026, HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage.10Internal Revenue Service. Inflation Adjusted Items for Health Savings Accounts and Excepted Benefit HRAs
A quick way to read the pattern on your own form: if a deduction lowers all three boxes equally, it came through a cafeteria plan. If Box 1 is significantly lower than Boxes 3 and 5 but those two match each other, retirement plan contributions are the main driver. That single observation is the most useful thing to understand when reading a W-2.
Boxes 2, 4, and 6: What Was Actually Withheld
Boxes 1, 3, and 5 report wages. The boxes right beside them report the tax that came out of your paychecks on those wages.
Box 2 is the total federal income tax your employer already sent to the IRS on your behalf. When you file, the IRS compares Box 2 against the tax you actually owe on your Box 1 income. If your employer withheld more than your liability, you get a refund. If they withheld less, you owe the difference. A common reason Box 2 looks low relative to Box 1 is that pre-tax deductions lowered your withholding calculation along with your taxable wages. If you claimed zero allowances or requested extra withholding on your W-4, Box 2 could be high relative to your actual liability.
Box 4 should equal 6.2% of Box 3, and Box 6 should equal 1.45% of Box 5 plus any 0.9% surtax. For 2026, the maximum possible amount in Box 4 is $11,439, which is $184,500 times 6.2%.7Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Run the math. If Box 4 doesn’t equal Box 3 times 0.062, or Box 6 doesn’t roughly equal Box 5 times 0.0145, contact your payroll department. Overpayments of Social Security tax, which can happen if you worked for two employers whose combined wages exceeded the cap, are recovered when you file your return.
If the Numbers Look Wrong or the Form Never Arrives
Your employer must deliver your W-2 by January 31.11Social Security Administration. Deadline Dates to File W-2s If you haven’t received it by early February, contact the employer directly. If you still don’t have it by the end of February, call the IRS at 800-829-1040 with your name, Social Security number, dates of employment, and your employer’s contact information. The IRS will reach out to your employer and send you Form 4852, which serves as a substitute W-2.12Internal Revenue Service. If You Don’t Get a W-2 or Your W-2 Is Wrong
If the W-2 you received has incorrect figures, ask your employer for a corrected Form W-2c.13Internal Revenue Service. About Form W-2 C, Corrected Wage and Tax Statements Don’t file your return with numbers you know are wrong. If the filing deadline is close and you can’t get a corrected form in time, you can file using Form 4852 and your best estimates based on your pay stubs, explaining on the form how you calculated the figures and what steps you took to get the correct W-2.14Internal Revenue Service. Form 4852 – Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R If the real W-2 or W-2c eventually arrives and the numbers differ from what you filed, amend your return with Form 1040-X.