What Is Less Sec 125 on a W-2? What Other Cafe 125 Means and What It Saves You

• Employee Social Security and Medicare tax is 7.65%, so every $1,000 taken out as Sec 125 saves at least $76.50 in payroll tax, per IRS Publication 15 (2026).
• The 2026 health FSA salary reduction limit is $3,400, and the dependent care limit is $7,500, per IRS Revenue Procedure 2025-32 and IRS Publication 15-B (2026).
• Box 14a on the 2026 Form W-2 is optional for employers, which is why some W-2s show a Sec 125 total and others show nothing, per the IRS W-2 and W-3 General Instructions (2026).
• Workers paid an average $1,440 a year toward single coverage and $6,850 toward family coverage in 2025, per the KFF Employer Health Benefits Survey (2025).

You are looking at a pay stub, a year-end payroll summary or a W-2 and you see "Less Sec 125" or "Other Cafe 125" next to a dollar amount. Less Sec 125 is almost always your pre-tax benefit deductions added together, and it lowers the wages your tax is figured on. That is a tax break, not a penalty. The rest of this guide shows where the label comes from, what it saves you, and what to do if you do not recognize it.

Reviewed by a licensed benefits professional. Last reviewed: September 29, 2026.

What is less sec 125 on a W-2?

Less Sec 125 is a payroll label for the total of your Section 125 cafeteria plan deductions, subtracted from gross pay before tax. The "Sec 125" points to Section 125 of the Internal Revenue Code. The word "less" means the amount is subtracted.

Form W-2 itself has no printed "Less" line. The wording usually comes from your employer's payroll system, on a pay statement or a year-end summary that walks from gross pay down to taxable wages. Each payroll company shortens the deduction names its own way, and the IRS does not assign them.

A Section 125 cafeteria plan is a written employer plan that lets you pay for certain benefits with pay that has not been taxed yet. Benecor Health's Section 125 cafeteria plan guide→ covers how employers set one up.

These are patterns, not rules. Your employer's legend is the final word.

What does other cafe 125 mean on a W-2?

Other Cafe 125 on a W-2 means the same thing as Sec 125: pre-tax deductions taken through a cafeteria plan. "Cafe" is short for cafeteria, and "Other" is the description text sitting in Box 14, the box the W-2 calls "Other."

Box 14 is where an employer may report items that do not fit another box. The IRS W-2 and W-3 General Instructions (2026) say employers may include the total value of fringe benefits in box 14a, though it is not required. That is why one worker's W-2 shows an "Other Cafe 125" total and a coworker's employer leaves Box 14 blank.

If your W-2 shows a number next to Other Cafe 125, treat it as information only. It has already been left out of your taxable wages. You do not add it back and you do not owe tax on it.

Benecor's guides to W-2 Box 14 and Section 125→ and to Section 125 on the W-2 for employees→ cover the other Box 14 labels.

What does a cafe 125 deduction do to my W-2 boxes?

A Section 125 deduction lowers your Box 1 federal wages, Box 3 Social Security wages and Box 5 Medicare wages by the amount you paid through the plan. Your gross pay stays the same. Only the taxable part shrinks.

State wages in Box 16 usually drop too, since most states follow the federal treatment. Check your state's rules, because a few states tax some benefits differently.

Is less sec 125 taxable?

Less Sec 125 is not taxable when the money pays for a qualified benefit such as health premiums, dental premiums, a health FSA or dependent care. IRS Publication 15-B (2026) treats those cafeteria plan benefits as excluded from federal income tax withholding and FICA.

The deduction comes out of gross pay before tax is figured. Your paycheck shrinks by the premium, but your taxes shrink too, so take-home pay drops by less than the deduction.

Worked example: $5,000 of less sec 125

Take a hypothetical employee who earns $62,000 a year and elects $3,900 of medical premiums, $500 of dental premiums and $600 for a health FSA. That is $5,000 of Less Sec 125, or $416.67 a month.

1. Yearly Sec 125 total: $3,900 + $500 + $600 = $5,000.
2. Box 1 wages: $62,000 minus $5,000 = $57,000.
3. FICA saved: 7.65% of $5,000 = $382.50.
4. Federal income tax saved at the 12% bracket: 12% of $5,000 = $600.00.
5. Total tax saved: $382.50 + $600.00 = $982.50 a year.

The same $5,000 of benefits costs this employee about $4,017.50 out of pocket. State income tax savings would add to that in most states.

What benefits are inside a less sec 125 total?

A Less Sec 125 total can hold any qualified benefit your employer runs through the plan. The most common are medical, dental and vision premiums, a health FSA, and a dependent care FSA, per IRS Publication 15-B (2026).

Two limits are worth knowing because they cap what can sit inside the total:

• Health FSA: the 2026 salary reduction limit is $3,400, per IRS Revenue Procedure 2025-32.
• Dependent care: you can exclude up to $7,500 a year, or $3,750 if married filing separately, per IRS Publication 15-B (2026).

Premiums are not capped by the IRS in the same way. They are whatever your plan costs you. KFF's 2025 Employer Health Benefits Survey found workers paid an average of $1,440 a year for single coverage and $6,850 for family coverage.

Can I stop a cafe 125 deduction mid-year?

You generally cannot stop a cafe 125 deduction mid-year just because you changed your mind. Section 125 elections are locked for the plan year, and 26 CFR 1.125-4 allows changes only after specific events, such as marriage, divorce, a birth, or gaining or losing other coverage.

The rule exists because the tax break depends on the election being made before the plan year starts. A change must also match the event. Getting married, for example, can let you drop your own coverage to join your spouse's plan.

A newer source of surprise deductions is a Section 125 "wellness" or indemnity plan added by the employer. Benecor's guide to the Section 125 cafeteria plan wellness deduction→ explains how those plans work.

How do I check that my less sec 125 amount is right?

You check a Less Sec 125 amount by matching it to the benefits you elected, then confirming your Box 1 wages equal gross pay minus that total. If both match, the deduction is working as designed.

1. Find your benefits confirmation from open enrollment. It lists your cost for each benefit.
2. Add up your monthly costs and multiply by 12, or by the number of months you were enrolled.
3. Compare that total to the year-to-date Sec 125 line on your last pay stub.
4. Check Box 1. Gross pay minus the Sec 125 total, and any other pre-tax deductions such as a 401(k), should equal Box 1 wages.
5. Look for a second 125 line with no matching benefit on your confirmation. That is the one to ask HR about.

What should I ask HR about a sec 125 deduction?

You should ask HR which benefits make up the Sec 125 total, when you elected them, and whether any were added by the employer. A written answer gives you a record if a number looks wrong.

For the employer view of these labels, see this plain-English guide to why Section 125 reduces W-2 wages↗. Benecor's guide to the H125 health deduction→ covers the health-only label. If you still cannot match a deduction, request a case review→ with a Benecor benefits expert.

Sources: IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits (2026); IRS Publication 15, Employer's Tax Guide (2026); IRS General Instructions for Forms W-2 and W-3 (2026); IRS Revenue Procedure 2025-32 (2026 inflation-adjusted amounts); 26 CFR 1.125-4, Permitted election changes (2026); Internal Revenue Code Section 125 (2026); KFF, 2025 Employer Health Benefits Survey (2025).