CAFE 125 on my 2024 W2 - Can someone explain what this means? Good or bad for my taxes?
Hi everyone, just got my W2 for 2024 and noticed something called "CAFE 125" listed in box 14. I've never seen this before (or maybe just never noticed it?) and have no idea what it means. Is this something I should be concerned about for my taxes? Does it mean I'm getting more money back or paying more? Tried googling but the explanations are super technical and confusing. Can someone break this down in simple terms? Thanks in advance for any help!
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Amina Diop
No need to worry! CAFE 125 is actually a good thing on your W2. It refers to Section 125 of the Internal Revenue Code, which allows for pre-tax deductions from your paycheck for things like health insurance premiums, flexible spending accounts (FSAs), or health savings accounts (HSAs). When you see CAFE 125 on your W2, it's showing the amount of money that was deducted from your paycheck BEFORE taxes were calculated. This means you didn't pay income tax on that money, which lowers your overall taxable income. It's basically a tax benefit for participating in your employer's benefits programs.
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Oliver Weber
•So does that mean I should be doing something specific with this number when I file my taxes? Or is it just informational?
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Amina Diop
•You don't need to do anything special with this number when filing your taxes. It's primarily informational and shows you how much pre-tax money was set aside through these plans. Your employer has already accounted for these pre-tax deductions when calculating your wages in Box 1 of your W2 (which shows your taxable wages). The amount in Box 1 is already reduced by your CAFE 125 contributions, so you're already getting the tax benefit automatically.
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Natasha Romanova
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NebulaNinja
•Does it work with other tax forms too? I have a ton of 1099s this year and some weird deductions I don't understand.
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Javier Gomez
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Natasha Romanova
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NebulaNinja
Just wanted to follow up after trying taxr.ai for my tax documents! It was actually super helpful with explaining my W2 and all my 1099s. I had a bunch of confusing codes like the CAFE 125 mentioned in this thread, plus some weird deductions on my 1099-MISC that I didn't understand. The explanations were super clear and helped me figure out which expenses I could claim. Definitely made tax season less stressful!
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Malik Thomas
•Wait, how does this actually work? I've been trying to get through to the IRS for weeks about a similar issue. Does it actually connect you to a real person?
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Javier Gomez
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Isabella Oliveira
Just to add some more helpful info on CAFE 125 - if you're wondering where this amount comes from, it's usually the total of all your health insurance premiums, FSA contributions, dependent care FSA, and any other pre-tax deductions you elected during open enrollment with your employer. If you log into your benefits portal, you should be able to match up this number with what you signed up for.
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Ravi Kapoor
•Is there a limit to how much you can contribute to these pre-tax accounts? I feel like my company never explains this stuff clearly.
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Isabella Oliveira
•Yes, there are definitely limits! For 2024, the FSA contribution limit is $3,200 for healthcare FSAs. Dependent care FSAs have a limit of $5,000 per household. HSAs have higher limits - $4,150 for individuals and $8,300 for family coverage, with an extra $1,000 catch-up contribution if you're over 55. These limits change almost every year with inflation adjustments, so it's always good to check during open enrollment. Most company benefit portals won't let you elect more than the maximum, but it's still good to know what the limits are so you can maximize your tax savings!
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Freya Larsen
I used to work in payroll and can confirm what others have said about CAFE 125. It's absolutely a good thing! One thing to watch for though - if you're contributing to Social Security, these deductions DO NOT reduce your Social Security wages, only your federal taxable wages. That's why your Box 3 (Social Security wages) might be higher than Box 1 (Federal taxable wages).
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GalacticGladiator
•Interesting! So does that mean we're still paying Social Security tax on the CAFE 125 amount?
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Gabriel Ruiz
•Yes, exactly! You still pay Social Security and Medicare taxes on the CAFE 125 amount. Only federal income tax (and usually state income tax) are reduced by these pre-tax deductions. So if you contributed $2,000 to your FSA, you'd save on federal income tax for that $2,000, but you'd still pay the 6.2% Social Security tax and 1.45% Medicare tax on it. That's why Box 3 and Box 5 on your W2 will be higher than Box 1 when you have CAFE 125 deductions.
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Freya Christensen
This is such a helpful thread! I'm dealing with the same confusion about CAFE 125 on my W2. One thing I'd add is that if you're ever unsure about how much you contributed to these pre-tax accounts during the year, most employers also include a breakdown in your final paystub of the year or in your benefits summary. It's really reassuring to know this is actually saving me money on taxes rather than costing me more. I was worried I had made some mistake during benefits enrollment, but sounds like these pre-tax deductions are actually one of the best tax benefits available to employees. Thanks everyone for the clear explanations!
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James Maki
•This is exactly what I needed to read! I was panicking when I saw CAFE 125 on my W2 for the first time this year and thought it meant I owed more taxes. It's such a relief to understand that it's actually helping me save money. I wish employers did a better job explaining these benefits when we sign up for them - would have saved me a lot of stress! Does anyone know if there's a way to see the tax savings breakdown, like exactly how much federal tax I saved by participating in these pre-tax programs?
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