CAFE 125 on Your W-2: What the Line Means and How to Check It
CAFE 125 is a payroll label for pay you directed into your employer's Section 125 cafeteria plan, most often for health, dental or vision premiums. This guide explains why the label can show up in W-2 Box 14, how it lowers your taxable wages, a worked savings example, how to match it to your pay stub, and what to ask HR if the amount looks wrong.
- Employee-paid accident and health premiums through a cafeteria plan are exempt from income tax withholding, Social Security tax and Medicare tax (IRS Publication 15-B, 2026).
- Box 14 has no fixed IRS code. The 2026 Form W-2 says employers may use it for information such as state disability insurance taxes withheld, so a label like CAFE 125 is the employer's wording (IRS Form W-2, 2026).
- Your share of FICA is 7.65%, made up of 6.2% Social Security and 1.45% Medicare, and the Social Security wage base is $184,500 in 2026 (IRS Publication 15, 2026).
- A health FSA run through a cafeteria plan is capped at $3,400 for plan years beginning in 2026 (IRS Publication 15-B, 2026).
- Workers paid an average of $1,440 a year for single coverage and $6,850 for family coverage in 2025 (KFF, 2025 Employer Health Benefits Survey).
If your W-2 or pay stub shows CAFE 125, your employer took part of your pay before tax and sent it to a Section 125 cafeteria plan. The label is short for cafeteria 125, and it is not an extra tax. This guide shows what the line means, where to find it, what it saves you, and what to ask HR if the amount looks wrong.
Reviewed by a licensed benefits professional. Last reviewed: October 16, 2026.
What does CAFE 125 mean on a W-2?
CAFE 125 means cafeteria plan, Section 125 of the Internal Revenue Code. It is the name your payroll system gives to pay you chose to put toward benefits before tax. It is a label, not a tax and not a separate benefit.
A cafeteria plan is a written employer plan that lets employees choose between taxable pay and certain tax-free benefits. The list of allowed benefits includes accident and health coverage, dependent care assistance, group-term life insurance and HSAs (IRS Publication 15-B, 2026). Your health, dental and vision premiums are the most common items inside a CAFE 125 amount.
Benecor's Section 125 cafeteria plan guide explains the plan itself in plain terms.
What is Other CAFE 125 on your W-2?
Other CAFE 125 is the same Section 125 amount, printed with the wording your employer chose. It usually appears in Box 14, the box employers use for information the standard boxes do not cover.
The IRS does not assign a code to Box 14. The 2026 Form W-2 says employers may use this box to report information such as state disability insurance taxes withheld (IRS Form W-2, 2026). That is why one employer prints CAFE 125, another prints Sec 125, and a third prints nothing at all. Some payroll systems add the word Less to show the amount was subtracted from wages. Treat Less Other CAFE 125 as the same item and check it against your pay stub.
Benecor's guides to Less Sec 125 on a W-2 and W-2 Box 14 for Section 125 cover the other label variations.
Where does CAFE 125 show up on my W-2 and pay stub?
CAFE 125 shows up on your pay stub as a pre-tax deduction, and on your W-2 as a lower number in Box 1, Box 3 and Box 5, plus an optional memo line in Box 14.
| Document | What to look for | Source |
|---|---|---|
| Pay stub | A pre-tax deduction labeled CAFE 125, caf125, sec 125 or h125 | Your payroll provider |
| W-2 Box 1 | Wages should be lower than gross pay by your pre-tax benefits | IRS Publication 15-B, 2026 |
| W-2 Boxes 3 and 5 | Social Security and Medicare wages are also lower for health premiums | IRS Publication 15-B, 2026 |
| W-2 Box 14 | An optional memo with the employer's own label, such as CAFE 125 | IRS Form W-2, 2026 |
Here is a hypothetical example. Say your gross pay is $52,000 and you put $200 a month, or $2,400 a year, into health premiums through the plan. Your 401(k) and other items are left out to keep the math clean.
| W-2 box | Amount | Why |
|---|---|---|
| Box 1, wages | $49,600 | $52,000 minus $2,400 |
| Box 3, Social Security wages | $49,600 | Health premiums are exempt from Social Security tax |
| Box 5, Medicare wages | $49,600 | Health premiums are exempt from Medicare tax |
| Box 14, memo | CAFE 125 $2,400 | Employer's label, optional |
If your Box 1 matches your gross pay minus your deductions, the plan is doing its job. If it does not, ask payroll to explain the gap. Benecor's wage statement guide walks through the same check line by line.
How much does CAFE 125 save me?
CAFE 125 saves most workers about 19.65 cents on every pre-tax dollar. That is 7.65% FICA plus a 12% federal income tax bracket, which is an assumption for this example. Your bracket may differ, and state tax can add more.
FICA is 6.2% Social Security plus 1.45% Medicare on your pay (IRS Publication 15, 2026). The 6.2% part stops at the $184,500 wage base in 2026, so higher earners save a little less on that piece.
| Line | Monthly | Yearly |
|---|---|---|
| Pre-tax premiums | $200.00 | $2,400.00 |
| FICA saved at 7.65% | $15.30 | $183.60 |
| Federal income tax saved at 12% | $24.00 | $288.00 |
| Total tax saved | $39.30 | $471.60 |
For scale, KFF found workers paid an average of $1,440 a year for single coverage in 2025 (KFF, 2025 Employer Health Benefits Survey). A worker paying that amount through a cafeteria plan would save about $282.96 a year on the same assumptions.
How do I check my CAFE 125 amount against my pay stub?
Add up every CAFE 125 deduction on your pay stubs for the year and compare the total to Box 14, then to the drop from your gross pay in Box 1. The numbers should line up within a few dollars.
- Collect your last pay stub of the year, which shows year-to-date totals.
- Find each pre-tax line: medical, dental, vision, FSA and anything labeled CAFE 125 or Sec 125.
- Add those year-to-date amounts.
- Compare the total to Box 14 if your employer prints it, and to the gap between your gross pay and Box 1.
- Ask payroll in writing about any difference you cannot explain.
Employers are required to report the cost of employer-sponsored health coverage in Box 12 with code DD, but that figure is informational and is not taxable (IRS General Instructions for Forms W-2 and W-3, 2026). Do not add it to your CAFE 125 total. Benecor's Box 12 code DD guide explains why.
Can I stop or change my CAFE 125 deduction?
Usually only after a qualifying life event, and only if your plan allows it. Section 125 elections are generally locked for the plan year, and mid-year changes are limited to events listed in 26 CFR 1.125-4, such as marriage, divorce, birth, adoption or a change in employment status.
Plans set their own deadlines for asking, so read your plan document before the window closes. Benecor's list of Section 125 qualifying life events covers the timing rules.
What should I ask my employer about CAFE 125?
Send HR a short written request and keep the reply. Copy this email and fill in the brackets.
Employers who want to see how a Section 125 plan is set up and why the label appears can read Summit Health Benefits' guide to Section 125 on a W-2. If you want a Benecor benefits expert to look at your situation, contact Benecor Health.
Sources: IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits (2026); IRS Publication 15, Employer's Tax Guide (2026); IRS Form W-2, Wage and Tax Statement, notice to employee (2026); IRS General Instructions for Forms W-2 and W-3 (2026); 26 CFR 1.125-4, Permitted election changes (2026); KFF, 2025 Employer Health Benefits Survey (2025).
Frequently asked questions
- What does CAFE 125 mean on a W-2?
- It is a payroll label for pay you chose to put into your employer's Section 125 cafeteria plan before tax, most often for health, dental or vision premiums. Accident and health benefits in a cafeteria plan are exempt from income tax withholding, Social Security tax and Medicare tax (IRS Publication 15-B, 2026).
- What is Other CAFE 125 on my W-2?
- It is the same Section 125 amount, shown under the wording your employer chose in Box 14. The IRS does not set a code for Box 14, so employers pick their own labels (IRS Form W-2, 2026).
- Why is CAFE 125 in Box 14 and not Box 1?
- Box 1 shows your taxable wages after pre-tax benefits are removed, so it does not list the benefit by name. Box 14 is a memo box where employers may add information, which is why CAFE 125 sometimes appears there as a reference.
- Is CAFE 125 taxable?
- No for federal income tax, Social Security and Medicare when the amount is for employee-paid health premiums through a valid cafeteria plan (IRS Publication 15-B, 2026). State rules can differ, so check your state's guidance.
- Can I get my CAFE 125 deduction removed?
- Usually only after a qualifying life event that your plan allows (26 CFR 1.125-4, 2026). Ask HR for your signed election form and the plan document, and keep the written reply.
- Is CAFE 125 the same as Box 12 code DD?
- No. CAFE 125 is the amount you paid through the plan. Box 12 code DD reports the total cost of employer-sponsored health coverage, including the employer share, for information only (IRS General Instructions for Forms W-2 and W-3, 2026).
Continue reading
- Less Sec 125 and Other Cafe 125 on Your W-2, Explained — Employee Benefits
Less Sec 125 and Other Cafe 125 on a W-2 are pre-tax deductions from your Section 125 plan. See what they cover, what they save and how to check them.
- CAF125 on a Pay Stub or W-2, Explained — Employee Benefits
CAF125 is a pre-tax payroll line for benefits paid through a Section 125 cafeteria plan. See what it covers, what it saves you, and how to check it.
- What Is Sec 125 on a W-2? Plain-English Guide — Employee Benefits
Sec 125 on a W-2 means pre-tax benefit deductions, not extra tax. See where it shows up, what it saves you in real dollars, and when to ask HR.
About the author
Muhammad Mudassir — Co-founder & Health Tech Sales Lead
Muhammad Mudassir, who goes by Moe, is a co-founder and health technology operator focused on Section 125 cafeteria plans and zero-cost employer benefits. He has spent years getting employers enrolled in compliant cafeteria plans, onboarding nationwide workforces into the WoW Health and UnifyWell ecosystems, and translating the mechanics of FICA recapture into language that HR, finance, and ownership can act on.