Filing

W-2 Box 12 Codes Explained for 2027 Filing

By GetTaxCalculator Editorial Team· Published 2026-09-10

Box 12 on your W-2 contains lettered codes that report specific types of compensation or benefits. For 2026, the most important additions are Code TP (qualified tips) and Code TT (qualified overtime). This guide covers all the codes you are likely to encounter and explains how each one affects your tax return.

What is Box 12?

Box 12 is a section on Form W-2 where your employer reports amounts that need special tax treatment. Each entry consists of a letter code (or two-letter code) followed by a dollar amount. The box has room for up to four entries. If more are needed, your employer will issue an additional W-2.

These codes do not add to or subtract from your Box 1 wages on their own. Some codes report amounts already excluded from Box 1 (like pre-tax retirement contributions). Others report amounts included in Box 1 that qualify for deductions elsewhere on your return (like the new OBBBA codes). Understanding what each code means helps you fill out your 1040 correctly and avoid missing deductions.

Common Box 12 codes

Below are the Box 12 codes you will most frequently see on a W-2. Note that codes for retirement plan contributions (D, E, G, etc.) report the amount you contributed through payroll; the specific annual contribution limits for each plan type are published separately by the IRS each year.

Retirement and deferred compensation

Code D: Elective deferrals to a 401(k) plan. This is the pre-tax amount you contributed through payroll deductions. It is excluded from Box 1 but included in Boxes 3 and 5 (Social Security and Medicare wages).
Code E: Elective deferrals to a 403(b) plan. Similar to Code D, but for employees of public schools, hospitals, and certain nonprofits.
Code G: Elective deferrals and employer contributions to a 457(b) plan. Used by state and local government employees.
Code AA: Designated Roth contributions to a 401(k) plan. Unlike Code D, these are after-tax contributions and are included in Box 1.
Code BB: Designated Roth contributions to a 403(b) plan.

Health and insurance

Code DD: Cost of employer-sponsored health coverage. This is the total premium cost (employer + employee portions) and is for informational purposes only. It is not taxable.
Code W: Employer contributions (including employee pre-tax contributions) to a Health Savings Account (HSA). This amount is excluded from income and should match Form 8889.
Code C: Taxable cost of group-term life insurance over $50,000. This amount is included in Boxes 1, 3, and 5.

Other common codes

Code L: Substantiated employee business expense reimbursements under an accountable plan. Not taxable.
Code M: Uncollected Social Security tax on taxable cost of group-term life insurance over $50,000 (for former employees).
Code P: Excludable moving expense reimbursements paid directly to members of the Armed Forces.
Code T: Adoption benefits. These may be excluded from income up to the annual limit.

The new codes: TP and TT

Starting TY 2026, two codes were added to Box 12 as part of the OBBBA:

Code TP: Qualified tips

Code TP reports tips earned in a customarily tipped occupation that qualify for the above-the-line deduction under IRC section 224. The amount shown is included in your Box 1 wages. When you file, you transfer this amount to Schedule 1-A Part I, where you can deduct up to $25,000 of qualified tips.

For a full explanation of eligibility rules and the MAGI phase-out, see our Code TP glossary entry or the No Tax on Tips Calculator.

Code TT: Qualified overtime premium

Code TT reports the overtime premium pay for non-exempt employees under the FLSA. Only the premium portion qualifies (the extra 0.5x for time-and-a-half, or the extra 1.0x for double-time). This amount is included in Box 1 and flows to Schedule 1-A Part II, where the deduction is capped at $12,500 (single/HoH) or $25,000 (MFJ).

See our Code TT glossary entry for more on eligibility.

How to use Box 12 when filing

When preparing your 2026 return, review every Box 12 entry on each W-2 you received. Here is how the most common codes affect your filing:

Codes D, E, G: Verify these match your pay stub deductions. They are already excluded from Box 1, so no additional action is needed on your 1040.
Code DD: Informational only. You do not enter this anywhere on your return.
Code W: Transfer to Form 8889 (HSA). Verify it does not exceed the annual HSA contribution limit.
Code C: Already included in Box 1. No additional action, but be aware it increases your taxable wages.
Code TP: Transfer to Schedule 1-A Part I to claim the tips deduction.
Code TT: Transfer to Schedule 1-A Part II to claim the overtime deduction.

If you have multiple W-2s, add the amounts for each code across all forms. The annual deduction caps ($25,000 for tips, $12,500/$25,000 for overtime) apply to your combined total, not per employer.

Frequently Asked Questions

How many codes can appear in Box 12?

Box 12 has space for up to four code/amount pairs on a single W-2. If your employer needs to report more than four, they will issue an additional W-2 form.

What is the difference between Code TP and Box 7?

Box 7 reports Social Security tips, which are tips subject to Social Security tax. Code TP in Box 12 reports qualified tips eligible for the OBBBA income tax deduction. The amounts may overlap but serve different purposes.

Are Code TP and Code TT mandatory for 2026?

Yes. Starting TY 2026, employers must use these codes. The transitional relief from IRS Notice 2025-69 that applied to tax year 2025 no longer applies.

Do Box 12 amounts change my Box 1 wages?

Not directly. Most Box 12 entries report amounts already included in or excluded from Box 1. Code TP and Code TT report amounts that are included in Box 1 but can be deducted on Schedule 1-A.

What does Code DD mean on my W-2?

Code DD reports the total cost of employer-sponsored health coverage, including both the employer and employee portions. This amount is informational and is not taxable income.