What Is S125 on a W-2? What the S125 Code in Box 14 Means and What to Do With It

• Employees pay 7.65% Social Security and Medicare tax (6.2% plus 1.45%), so every $1,000 of S125 saves at least $76.50 in payroll tax, per IRS Publication 15 (2026).
• The IRS lists health insurance premiums deducted and nontaxable income among the items an employer may report in Box 14, per the IRS Form W-2 instructions for employees (2026).
• The 2026 health FSA salary reduction limit is $3,400 and the dependent care exclusion is up to $7,500, per IRS Publication 15-B (2026).
• Workers paid an average of $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 reading your W-2 or pay stub and one line says "S125" next to a dollar amount. S125 stands for Section 125, the employer cafeteria plan that pays for your benefits with pay that has not been taxed yet. It is a tax break, not a fee or a penalty. This guide shows what the label means, what to do with it at tax time, and how to check that the number is right.

Reviewed by a licensed benefits professional. Last reviewed: September 30, 2026.

What is S125 on a W-2?

S125 on a W-2 is a shorthand for Section 125 of the Internal Revenue Code, the law behind employer cafeteria plans. It marks the total your employer deducted for benefits before tax was figured, such as health, dental and vision premiums or an FSA.

The IRS does not assign S125 as a Box 14 code. Form W-2 leaves Box 14 open for the employer to describe. The IRS Form W-2 instructions for employees (2026) say employers may use Box 14 to report items such as health insurance premiums deducted and nontaxable income. So "S125" is your payroll provider's label, and providers shorten it in different ways.

Your employer's pay statement legend is the final word on its own labels. Benecor Health's Section 125 cafeteria plan guide→ explains how employers set the plan up.

Does S125 mean the same thing as Sec 125 on a W-2?

Yes. S125, Sec 125, SEC125 and Caf 125 all point to Section 125 deductions. The letters differ because each payroll system limits how many characters a line can show.

Benecor Health's guide to less sec 125 and other cafe 125 on a W-2→ covers the "Less" and "Other Cafe" wording. Its guide to the Box 14 Section 125 category→ covers which Box 14 category to pick in tax software. This page focuses on the S125 code itself and what it changes on your return.

Do I enter S125 when I file my taxes?

You generally do not need to enter an S125 amount when you file. Box 14 is an information box, and the S125 total has already been removed from your taxable wages in Box 1.

Follow this order when you prepare your return:

1. Enter Box 1 exactly as printed. Box 1 already excludes your Section 125 deductions.
2. Leave Box 14 alone unless your software asks for it. Some tax programs ask for Box 14 items so they can pick up things like state disability insurance. An S125 note carries no tax to report.
3. Do not add S125 back to your wages. Adding it back would tax the same money twice.
4. Keep the number for your records. It helps you confirm that Box 1 is right.

Section 125 also lowers Box 3 (Social Security wages) and Box 5 (Medicare wages) for most benefits. IRS Publication 15-B (2026) treats qualified cafeteria plan benefits as exempt from Social Security and Medicare tax. A few items, such as certain adoption benefits, are treated differently under the IRS W-2 and W-3 General Instructions (2026).

How do I check that my S125 amount is right?

You check an S125 amount by adding up the benefits you elected and confirming that Box 1 equals gross pay minus that total. If both match, the plan is working as designed.

Here is a hypothetical example. An employee earns $54,000 a year and elects $300 a month for medical premiums ($3,600) and $1,000 for a health FSA. The 2026 health FSA limit is $3,400, so $1,000 is well inside it (IRS Publication 15-B, 2026).

The same $4,600 of benefits costs this employee about $3,696.10 out of pocket ($4,600 minus $903.90). The S125 line on the W-2 would read $4,600, and Box 1 would read $49,400. State income tax savings would add to that in most states.

To run the check on your own W-2, take these steps:

1. Find your benefits confirmation from open enrollment and add up each monthly cost.
2. Multiply by the months you were enrolled, then add any FSA election.
3. Compare that total to the S125 line on your last pay stub or in Box 14.
4. Subtract it from gross pay and any other pre-tax items such as a 401(k). The result should equal Box 1.

Why is my S125 amount different from my premiums?

An S125 total can differ from your premiums because it may hold more than premiums. It adds every benefit you elected through the plan and counts only the months you were enrolled.

These are the usual reasons a number looks off:

• An FSA election sits inside the total. A health FSA up to $3,400 or a dependent care election up to $7,500 counts as S125 (IRS Publication 15-B, 2026).
• You joined or left mid-year. A partial year means fewer months of deductions.
• A qualifying event changed your election. Marriage, birth, or a change in employment status can change what you pay under 26 CFR 1.125-4.
• The employer pays part of the premium. Only your share counts, not the employer's.
• A benefit was added by the employer. Some plans, such as a Section 125 wellness or indemnity plan, add their own deduction. Benecor's guide to the Section 125 cafeteria plan wellness deduction→ explains how those work.

For scale, workers paid an average of $1,440 a year toward single coverage and $6,850 for family coverage in 2025 (KFF Employer Health Benefits Survey, 2025). If your S125 total is far above what you expected, look for a line on your benefits confirmation that you do not recognize.

Can I stop an S125 deduction I did not choose?

You generally cannot stop an S125 deduction mid-year just because you changed your mind. Elections are fixed for the plan year, and 26 CFR 1.125-4 lists the events that permit a change, such as marriage, divorce, a birth, or a change in employment status.

The same regulation says a cafeteria plan is not required to allow these changes at all, so your plan document controls. You can also change your election at the next open enrollment.

What should I ask HR about an S125 line?

Ask HR which benefits make up the S125 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, Summit Health Benefits explains what Section 125 on a W-2 means↗. Benecor's guide to the W-2 Box 14 Section 125 code→ covers the same box from the IRS side. If you still cannot match a deduction, request a case review→ with a Benecor benefits expert.

Sources: IRS Publication 15, Employer's Tax Guide (2026), Social Security and Medicare tax rates; IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits (2026), cafeteria plan limits and tax treatment; IRS Form W-2 and instructions for employees (2026), Box 14; IRS General Instructions for Forms W-2 and W-3 (2026); 26 CFR 1.125-4, Permitted election changes; Internal Revenue Code Section 125; KFF, 2025 Employer Health Benefits Survey (2025).