W-2 Boxes 1, 3 and 5 Explained: Why Your Taxable Wage Amounts Differ

Form W-2 reports your wages and withholding for the year, but it does not use a single wage number for every tax. Box 1 generally reports wages for federal income-tax purposes. Box 3 reports Social Security wages, and Box 5 reports Medicare wages and tips. These numbers can differ because the rules for each wage base differ.

A common example is an employee's traditional 401(k) deferral. The contribution generally reduces wages included in Box 1 but remains in Social Security and Medicare wages. An eligible employer benefit can have a different effect. At higher wages, Box 3 can also differ from Box 5 because Social Security has an annual wage base and regular Medicare does not.

This guide explains the boxes using simplified employee examples. Your actual W-2 can include tips, taxable benefits, adjustments and other reporting rules. The IRS 2026 W-2 instructions are the primary source for the employer's reporting requirements. Use the instructions for the relevant year when you prepare a return.

Start by confirming that the form is for the right tax year and employer. Then compare the wage and withholding boxes with your final pay stub and benefit records. If a figure looks wrong, ask payroll how it was calculated before changing it or assuming that equal boxes are required.

Box 1 is labeled “Wages, tips, other compensation.” It generally reports taxable wages for federal income-tax purposes. This can include salary, hourly wages, bonuses, commissions and certain taxable benefits. It is not necessarily the same as the gross earnings number printed on a final pay stub.

The employer applies the relevant reporting rules for employee deferrals and benefits. A traditional 401(k) elective deferral is generally excluded from Box 1 wages when properly made under the plan. Designated Roth deferrals have different income-tax treatment. See the IRS retirement-plan contribution FAQ.

Box 1 is a wage figure, not the federal income tax you owe. Your return uses the form together with other income, deductions, credits and tax rules. Box 2 separately shows federal income-tax withholding. Withholding is a payment toward tax, so it is not necessarily equal to the final liability calculated on your return.

If your annual salary was $78,000 and you made a $3,900 traditional 401(k) deferral, a simplified Box 1 calculation might begin at $74,100 before other relevant benefits and adjustments. That is not a universal formula: taxable fringe benefits, eligible health coverage, other deductions or payroll corrections can change the final number. Ask payroll for the actual reconciliation.

Box 3 reports wages subject to Social Security tax, excluding Social Security tips reported separately in Box 7. Traditional employee 401(k) deferrals are generally included in Social Security wages even though they are generally excluded from Box 1. The IRS specifies this in its W-2 instructions.

Social Security wages are subject to an annual wage base. For 2026, the base is $184,500; for 2027, the Social Security Administration announced $192,300. The employee rate is generally 6.2% on covered wages up to the applicable base. See the SSA contribution and benefit base.

The W-2 instructions state that the total of Boxes 3 and 7 cannot exceed the applicable 2026 Social Security wage base. Box 3 alone is therefore not a complete view when a worker has reported Social Security tips in Box 7. Some employees or types of compensation have special coverage rules, so do not apply a shortcut without checking the form instructions.

Box 4 reports Social Security tax withheld. For a simple worker with no tips, no special adjustment and wages below the cap, 6.2% of Box 3 can provide a rough check. That arithmetic does not replace the actual reporting rules. If Box 4 looks inconsistent, ask payroll about tips, corrections or special wages.

When two employers pay a worker during the year, each W-2 reflects that employer's reporting. Combined Social Security withholding can exceed the employee maximum. The IRS distinguishes that situation from an overcollection by one employer. See IRS Topic 608 before deciding how to correct it.

Box 5 reports Medicare wages and tips. The regular employee Medicare rate is generally 1.45%, and Medicare does not have the same annual wage-base ceiling as Social Security. A worker whose covered wages exceed the Social Security base can therefore have a larger Box 5 than Box 3, even when both started from the same covered wages.

Box 6 reports Medicare tax withheld. Additional Medicare Tax can make a simple 1.45% multiplication incomplete for a higher-paid employee. An employer generally begins withholding the additional 0.9% on Medicare wages it pays an employee above $200,000 in the calendar year. The employee's final Additional Medicare Tax liability depends on the applicable return threshold and other relevant income. See the IRS questions and answers.

For example, assume one employer pays $220,000 in covered Medicare wages in 2026 and there are no tips, benefit exclusions or other adjustments. The regular employee Medicare portion is 1.45% of $220,000, or $3,190. The additional employer withholding on the $20,000 above $200,000 would be $180 under this simplified example. The employee's return may need a separate reconciliation.

The example does not establish a final tax bill or describe every W-2 situation. A spouse's income, another employer, railroad compensation or self-employment can complicate the return. Use Form 8959 and the relevant instructions when required.

Suppose a fictional employee receives $78,000 of gross wages in 2026, contributes $3,900 to a traditional 401(k), and pays $2,600 for an eligible health benefit through a plan that excludes the amount from federal income-tax, Social Security and Medicare wages. Assume no tips, taxable fringe benefits, other deductions or adjustments.

In this simplified case, federal income-tax wages would be $78,000 minus $3,900 minus $2,600, or $71,500. Social Security wages would be $78,000 minus $2,600, or $75,400, because the employee's traditional 401(k) deferral remains in that wage base. Medicare wages would also be $75,400 under the same assumptions. The employee's wages do not reach the 2026 Social Security cap.

At 6.2%, Social Security withholding on $75,400 would be $4,674.80. At 1.45%, regular Medicare withholding would be $1,093.30. These are annual illustrative calculations; employer pay-period rounding can affect a comparison by small amounts. Federal income-tax withholding is not calculated here because it depends on payroll periods, the Form W-4 and the employer's method.

The health-plan assumption matters. Not every insurance deduction is automatically excluded from all three wage bases. If the $2,600 were an after-tax deduction instead, the wage calculations could be different. Consult the plan documents, the employer and IRS Publication 15-B for the actual benefit.

The example is a worksheet, not a substitute for the employer's W-2 reconciliation. It excludes taxable life insurance, reimbursements, bonuses, corrections and other items that can make an actual form different.

The phrase “pre-tax” is a starting point, not a complete explanation. A traditional 401(k) deferral generally reduces federal income-tax wages while remaining subject to Social Security and Medicare. A designated Roth employee deferral is generally included in income-tax wages and also subject to the payroll taxes. Employer contributions have their own reporting treatment.

Health savings account contributions need special attention. The IRS instructions distinguish employer contributions, including employee contributions through an eligible cafeteria plan, from an employee's contribution made outside that arrangement. Contributions made outside the qualifying payroll arrangement may be deductible on a return if the individual is eligible, but they are not automatically excluded from payroll wages.

An employer generally reports HSA contributions described in the instructions in Box 12 with code W. That code includes certain employer and cafeteria-plan contributions; it should not be assumed to represent only a direct employer deposit. The employee must still consider eligibility, annual limits and the applicable Form 8889 instructions.

Dependent-care benefits are generally reported in Box 10 under the applicable rules. The 2026 maximum federal exclusion can be $7,500, or $3,750 for married filing separately, subject to plan and eligibility limits. Excluded benefits and the dependent-care credit interact, and the same expenses cannot be used twice. See the IRS dependent-care guidance.

The wage boxes are not a complete benefits statement. Keep the employer's plan confirmations and pay stubs. If you do not understand why a deduction affected one box but not another, ask payroll to identify the plan and tax treatment used.

Assume an employee has $220,000 in covered wages from one employer in 2026, no tips, no benefit exclusions and no other reporting adjustments. Under those simplified assumptions, the Social Security wage amount is limited to $184,500, while Medicare wages can remain $220,000 because Medicare has no comparable wage base.

The employee Social Security tax at 6.2% of $184,500 is $11,439. Regular Medicare at 1.45% of $220,000 is $3,190. Because the employer paid Medicare wages above $200,000, the simplified example also produces $180 of Additional Medicare withholding on the $20,000 above that employer withholding threshold.

This illustration does not calculate federal income-tax withholding or the employee's final Additional Medicare Tax liability. The return threshold varies with filing status, and wages from other sources can matter. The IRS guidance explains the difference between employer withholding and individual liability.

If a high-income worker's Box 3 is lower than Box 5, the cap can be a normal explanation. If the worker changed employers, each W-2 must be reviewed separately, and combined withholding may need attention under the multiple-employer rules. The tax year is essential: the 2027 Social Security base is higher than the 2026 base.

Begin with the final pay stub for the correct calendar year. Identify gross wages, taxable wage figures, federal withholding, Social Security and Medicare wages and tax, and major deductions. Look for year-end payroll adjustments, a bonus paid in a separate run or taxable benefits that may not be obvious from the regular-pay line.

Then compare W-2 Box 1 with the employer's federal taxable-wage total, Box 2 with federal income tax withheld, and Boxes 3 through 6 with the corresponding Social Security and Medicare totals. Include Box 7 if Social Security tips were reported. Pay attention to labels: “gross,” “federal taxable” and “Social Security taxable” can refer to different amounts.

If a number differs, record the tax year, employer, box number, final stub value and W-2 value. Ask payroll for a reconciliation. A small rounding difference, a correction after the last regular check or a taxable benefit may explain the discrepancy. A material error may require a corrected form; the employer can explain its correction process.

Do not change a W-2 amount on a return solely because a simple worksheet differs. Tax software may import the form, but the employee remains responsible for checking the information used. Keep the original form, payroll explanation and any corrected form with your records.

Each employer normally prepares a W-2 for the wages it paid. Gather all forms before calculating annual wage income and withholding. A new employer does not ordinarily stop Social Security withholding merely because a previous employer withheld tax earlier in the year.

For a simplified 2026 example, assume Employer A paid $120,000 and Employer B paid $100,000 in covered wages. Each is below the $184,500 base, so each may have withheld Social Security tax on the wages it paid. The combined covered wages are $220,000 and the total withheld can exceed the annual employee maximum.

The IRS says excess Social Security withholding from two or more employers may generally be claimed as a credit on the applicable return. If one employer alone withheld too much, the IRS generally directs the employee to request an adjustment from that employer; Form 843 may be relevant if the employer does not correct it. Consult IRS Topic 608 for the exact procedure.

Do not add employers' Box 3 figures and assume the sum should be capped on each individual W-2. Each form reports the employer's wages under the reporting rules. The return or correction procedure handles the applicable excess withholding. Railroad retirement and other special situations require separate attention.

1. Confirm the tax year, employer name and identifying information.
2. Gather a W-2 and final payroll records from each employer.
3. Compare Box 1 with federal income-tax wages, not only gross salary.
4. Compare Box 2 with federal income-tax withholding; do not include FICA or state withholding.
5. Compare Boxes 3 and 7 with covered Social Security wages and the correct year's wage base.
6. Check Box 4 against payroll records and investigate an apparent overcollection.
7. Compare Box 5 with Medicare wages and Box 6 with Medicare withholding, including any additional withholding.
8. Review retirement, HSA and dependent-care reporting using the relevant boxes and codes.
9. Ask payroll to reconcile an unexplained difference and retain any corrected form.
10. Use the tax-year return instructions to enter the forms and account for applicable credits or additional taxes.

Protect the form: it contains sensitive identifying information. Use a secure payroll portal or another employer-approved channel when requesting a correction.

Should Boxes 1, 3 and 5 always be equal?

No. Different tax rules, eligible benefit exclusions, retirement deferrals, the Social Security wage base and tips can make the boxes differ. Compare the employer's taxable wage records and applicable instructions.

Why is Box 1 lower than my salary?

One possible reason is a traditional employee 401(k) deferral or another eligible exclusion. Other payroll and reporting adjustments can also affect the amount. Salary alone does not determine Box 1.

Why is Box 5 higher than Box 3?

Social Security has an annual wage base while regular Medicare has no comparable cap. Reported Social Security tips or other special reporting can also matter. Check Boxes 3, 5 and 7 together when relevant.

Does Box 2 tell me my final federal income tax?

No. Box 2 reports federal income-tax withholding. The return calculates liability using the year's relevant income, deductions, credits and other rules, then accounts for withholding and other payments.

Does a traditional 401(k) avoid Social Security and Medicare?

Generally no. An employee's traditional deferral typically reduces federal income-tax wages but remains subject to Social Security and Medicare. The IRS retirement-plan FAQ describes this distinction.

Can the site's calculator reproduce my W-2?

The site's calculator models annual employee wage scenarios and does not reproduce every employer benefit, local tax, W-4 election or W-2 reporting rule. Use the employer's records and IRS instructions to verify an actual form.

Use the IRS W-2 instructions, IRS retirement-plan FAQ, SSA wage-base table and IRS Topic 608. The examples are simplified and do not establish an individual's actual reporting or tax liability.