W-2 Box 12 Code DD: What the Health Coverage Number Means and Why You Do Not Pay Tax on It

• Code DD is informational only and does not make health coverage taxable, per the IRS page on Form W-2 reporting of employer-sponsored health coverage (updated 2026).
• Employers that filed fewer than 250 Forms W-2 the year before do not have to report code DD at all, under IRS Notice 2012-9 (2012), and that relief still applies in 2026.
• The average employer health premium in 2025 was $9,325 for single coverage and $26,993 for family coverage, per the KFF Employer Health Benefits Survey (2025).
• Workers paid an average of $1,440 toward single coverage and $6,850 toward family coverage in 2025, per KFF (2025), so the employer paid most of a typical code DD amount.
• Employee FICA is 7.65% in 2026, so each $1,000 of health premium paid pre-tax saves at least $76.50 in payroll tax, per IRS Publication 15 (2026).

You opened your W-2, saw a big number next to "DD" in Box 12, and wondered if you owe tax on it. You do not. W-2 Box 12 code DD is the price tag of your health coverage for the year, shown so you can see what your employer spent on you. The rest of this guide shows what goes into that number and how to check it in five minutes.

Reviewed by a licensed benefits professional. Last reviewed: September 25, 2026.

What does code DD mean on a W-2?

Code DD on a W-2 means the cost of employer-sponsored health coverage for the year. The Affordable Care Act added this reporting rule, and the IRS says the amount includes both the employer's share and the employee's share of the premium.

Code DD sits in Box 12, the box that holds lettered codes for special items. Benecor's full W-2 Box 12 codes guide→ lists every letter. Code DD is the one most people ask about, because it is often the largest number on the form after wages.

The number is a receipt, not a bill. It tells you what the coverage cost. It does not change what you earned or what you owe.

Is W-2 Box 12 code DD taxable?

W-2 Box 12 code DD is not taxable. The IRS states that reporting the cost of health coverage on Form W-2 does not mean the coverage is taxable, and the employer's excludable contribution stays excluded from income (IRS, 2026).

Your employer's share of the premium is tax-free under Internal Revenue Code Section 106. If you paid your share through a Section 125 cafeteria plan, your share was also taken out before tax. That is why Box 1 wages are lower than your salary, not higher.

Here is what code DD does and does not touch on your return:

Tax software may ask you to type in every Box 12 code. That is fine. Entering code DD in the software does not add tax. It simply records the number.

What is included in the code DD amount?

The code DD amount includes the full premium for major medical coverage, both your share and your employer's share, plus a few related items the IRS lists. Health savings account contributions and salary-reduction-only health FSAs are left out, per the IRS reporting chart (2026).

The IRS chart splits coverage into three groups: must report, do not report, and optional.

Two lines surprise people. First, a hospital indemnity or wellness indemnity policy paid through pre-tax payroll belongs in code DD, so a new Section 125 wellness deduction can push the number up. Benecor's guide to the Section 125 cafeteria plan wellness deduction→ explains that deduction. Second, HSA money never goes in code DD. It shows up as code W, covered in the HSA cafeteria plan guide→.

Why is my code DD amount so high?

A code DD amount is usually high because it includes your employer's share of the premium, which is most of the cost. In 2025, employers paid about 84% of single coverage premiums and about 74% of family coverage premiums, based on KFF's 2025 survey averages.

KFF found the average single premium was $9,325 and workers paid $1,440 of it. The average family premium was $26,993 and workers paid $6,850. Your code DD amount will look like the full premium column, not the "you paid" column.

How do I check my code DD amount?

You check your code DD amount by adding up your pre-tax health premium deductions for the year from your pay stubs, then adding the employer share from your benefits statement. The total should roughly match code DD, since the IRS requires both shares.

Worked example: a single employee

Take a hypothetical employee earning $52,000 with single coverage at the 2025 KFF average. She pays $1,440 a year through her employer's Section 125 cafeteria plan, which is $55.38 per paycheck on 26 paychecks.

1. Add up her pay stub deductions: $55.38 x 26 = $1,439.88, about $1,440.
2. Find the employer share on her benefits statement: $7,885.
3. Add them: $1,440 + $7,885 = $9,325. That should match code DD.
4. Check Box 1: $52,000 minus $1,440 = $50,560, assuming no other pre-tax deductions.
5. Figure her tax savings: FICA of 7.65% on $1,440 is $110.16, and federal income tax at the 12% bracket is $172.80, for $282.96 kept in her pocket.

If the numbers do not line up, the usual causes are a mid-year plan change, a coverage tier change such as adding a spouse, or pre-tax indemnity premiums included in the total. A code DD that is missing entirely may simply mean your employer filed fewer than 250 Forms W-2, which makes the code optional under IRS Notice 2012-9.

Does code DD affect ACA subsidies or my tax refund?

Code DD does not affect your tax refund and is not the number used for ACA subsidy decisions. Marketplace affordability looks at what you pay for the lowest-cost self-only plan your employer offers, which must stay under 9.96% of household income for 2026, per IRS Revenue Procedure 2025-25.

This matters if you are thinking about dropping your job plan for a marketplace plan. If your share of self-only coverage is affordable under that 9.96% test, you generally cannot get a premium tax credit, no matter how large code DD is. Use your own paycheck deduction for self-only coverage, not code DD, when you run that test.

What should I ask HR about code DD?

You should ask HR three things about code DD: what coverage is included, whether any pre-tax indemnity or wellness premiums are in the total, and what the employer and employee shares were. A written answer gives you a record if a number looks off.

If Box 14 on your W-2 shows a Section 125 or cafeteria plan label, Benecor's guide to W-2 Box 14 and Section 125→ explains it, and the Section 125 tax code guide→ covers the law behind pre-tax deductions. For the employer side of W-2 codes, see this W-2 Box 14 codes explainer for employers↗.

Book a free W-2 walkthrough→ with a Benecor benefits expert.

Sources: IRS, Form W-2 reporting of employer-sponsored health coverage and reporting chart (page updated September 2026); IRS Notice 2012-9 (2012), restating Notice 2011-28 (2011); IRS General Instructions for Forms W-2 and W-3 (2026); IRS Publication 15, Employer's Tax Guide (2026); IRS Revenue Procedure 2025-25 (2025); Internal Revenue Code Sections 106 and 125 (2026); KFF, 2025 Employer Health Benefits Survey (2025).