CAF on your W-2 is shorthand for “cafeteria plan,” the Section 125 arrangement your employer uses to let you pay for certain benefits with pre-tax dollars. The number next to it in Box 14 is the total your employer routed into those benefits during the year. That money was already subtracted from the wages reported in Boxes 1, 3, and 5, so for most people the CAF figure is informational and nothing extra needs to be done with it at filing time.
Where It Appears and What the Number Represents
Look at Box 14 of your W-2, the one the IRS simply labels “Other.” The IRS doesn’t require standardized codes there, so employers can label the entry however they want.1Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 You might see CAF, CAFE, S125, CAFETERIA, or SEC 125. They all point to the same thing: salary you elected to spend on employer-sponsored benefits before any taxes were calculated.
The dollar amount is the sum of those pre-tax deductions for the year. If the line reads $6,200, that is $6,200 your employer withheld from your gross pay and applied to the benefits you elected. It is the reason the wages in Box 1 may look lower than the salary you think you earned.
What It Means for Your Taxes
A Section 125 plan works by salary reduction. Money you route into a qualifying benefit is excluded from your gross income entirely, not just deferred.2Office of the Law Revision Counsel. 26 U.S.C. 125 – Cafeteria Plans You never constructively receive the dollars, so they aren’t treated as wages for federal income tax purposes and are generally not subject to FICA or FUTA either.3Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
In practical terms, the CAF amount has already reduced three numbers on your W-2:
- Box 1, the wages used to calculate federal income tax.
- Box 3, the wages subject to the 6.2% Social Security tax.
- Box 5, the wages subject to the 1.45% Medicare tax.
A rough illustration: say you earn $65,000 and your cafeteria plan deductions for health insurance and an FSA total $7,000. Box 1 shows about $58,000 rather than $65,000. At a 22% marginal federal rate plus 7.65% in FICA, that $7,000 of pre-tax spending saves roughly $2,075 compared with paying for the same benefits with after-tax dollars. You still spent the money on the benefits you chose. You just didn’t pay tax on it first.
What to Do With It When You File
For most filers, nothing. The tax break is already baked into Box 1. You don’t claim an additional deduction, and the CAF figure doesn’t go on any specific line of your 1040.
When tax software asks you to categorize the Box 14 entry, pick “Section 125” or “Cafeteria plan” from the dropdown if either appears. If they don’t, “Other (not classified)” or “Not applicable” is fine. Software generally treats Box 14 as a memo field for federal purposes, so the category choice usually won’t change your federal refund or balance due. Selecting an accurate label simply keeps your records clean.
When the Box 14 Number Actually Matters
The federal answer is “informational,” but a couple of states don’t go along with the federal treatment of Section 125 contributions. California does not recognize the pre-tax exclusion for state income tax, so cafeteria plan contributions remain subject to California income tax even though they’re excluded federally. New Jersey has its own reporting quirks where the W-2 figures used for state purposes may reflect your full salary before cafeteria plan deferrals.
If you file in one of those states, the CAF number in Box 14 stops being a memo. State software may ask for it so the amount can be added back into your state taxable income. Have the figure ready when you get to the state portion of your return.
What’s Typically Funding That Amount
Cafeteria plans can only cover a defined list of qualified benefits. The ones that most often make up the CAF total are:
- Your share of health, dental, and vision insurance premiums, usually the single largest piece.
- A health care flexible spending account for out-of-pocket medical costs like copays, prescriptions, and eyeglasses.
- A dependent care flexible spending account for qualifying child care or elder care expenses.
- Contributions to a health savings account, available only with a high-deductible health plan.
- Group-term life insurance up to $50,000 of coverage. Amounts above that threshold remain subject to Social Security and Medicare taxes even when offered through the plan.3Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
- Adoption assistance, which qualifies for the income tax exclusion but still has Social Security and Medicare taxes applied.3Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
Pulling out your last pay stub of the year and adding up the pre-tax deductions in those categories should get you close to the CAF total on your W-2. Small differences usually trace back to pay periods that crossed a plan year boundary or benefits that are only partially pre-tax.
The Social Security Trade-Off
There is one quiet downside worth understanding. Because cafeteria plan contributions reduce the wages in Box 3, they also reduce the earnings the Social Security Administration posts to your record. The SSA uses your Box 3 figure, not your gross salary, when calculating future benefits.4Social Security Administration. POMS SI 00820.102 – Cafeteria Benefit Plans
For most workers the immediate tax savings outweigh a small reduction in a retirement benefit decades away. The per-year effect is small, though it does compound across a career. If you are in peak earning years and these particular years will drive your eventual benefit calculation, it is at least worth being aware that the pre-tax dollars you aren’t paying FICA on are also dollars that aren’t counting toward your Social Security record.