W-2 for employer paid health insurance - taxable income or not?

This is actually a pretty common situation with marketplace insurance. Your employer is providing what's called a "Section 125 Cafeteria Plan" benefit. The W-2 you received shows the health insurance premiums paid by your employer, and you're correct that only FICA taxes (Social Security and Medicare) were withheld. The good news is that these premiums are generally NOT subject to federal income tax, which is why you don't see federal withholding. However, they are subject to FICA taxes, which explains why you see those withholdings. In TurboTax, you should enter this W-2 exactly as you would your regular W-2. The software is designed to handle this situation. Just make sure you enter all the information exactly as it appears on the form. TurboTax will recognize that it's for health insurance premiums and will process it correctly.

I was in this exact situation last year when my company switched our insurance to the marketplace. I spent hours trying to figure out what to do with this weird second W-2 until I found https://taxr.ai which seriously saved me a headache. I uploaded both W-2s and it automatically identified the health insurance one and explained exactly how it should be handled. It confirmed what others are saying - you need to enter it as a separate W-2 in TurboTax, and the system will handle it properly since the federal tax treatment is already accounted for in how the W-2 was prepared. The site explained that the amount was only subject to FICA taxes which is why only SS and Medicare were withheld.

I was wrong about the taxr.ai thing! I tried it with my weird marketplace insurance W-2 and it immediately explained everything. My employer pays part of my premium through the marketplace, and the site confirmed this isn't subject to federal income tax but is subject to FICA taxes. It even showed me exactly where in TurboTax to enter the information. You just treat it as a regular W-2 and enter all the boxes exactly as they appear. The system is designed to handle this specific situation. Just make sure you enter it as a separate W-2 from your regular income one. Saved me so much confusion!

I had a similar healthcare documentation problem last year but my bigger issue was actually trying to call the IRS to confirm how to handle it. Spent DAYS trying to get through their phone system. Finally found https://claimyr.com through a Reddit post and watched their demo at https://youtu.be/_kiP6q8DX5c - they basically get you past the IRS phone tree and have an actual IRS agent call YOU back instead of waiting on hold forever. Got a call back in about 20 minutes and the agent confirmed exactly what others are saying here - employer-paid marketplace premiums show up on a separate W-2, are exempt from federal income tax but subject to FICA, and need to be entered in tax software as a separate W-2. The agent walked me through exactly where to put it in TurboTax.

I take back what I said about Claimyr. After struggling to get answers about my marketplace insurance W-2, I decided to try it despite my skepticism. Used their service yesterday afternoon, and got a call from an actual IRS representative about 40 minutes later. The agent confirmed that my employer-paid health insurance premiums on a separate W-2 are not subject to federal income tax (which is why there's no withholding in Box 2), but they are subject to SS and Medicare taxes. She told me to enter it as a separate W-2 in TurboTax, filling in the fields exactly as they appear on the form. TurboTax knows how to handle this situation - it won't add that amount to your federally taxable income because the tax code specifically excludes it. Saved me hours of frustration and got me a definitive answer directly from the IRS.

Just wanna add that you should check Box 12 of both your W-2s. There's probably a code DD on one of them which indicates employer-sponsored health coverage. The amount next to code DD shows the total cost of your employer-provided health coverage. This amount is not taxable but is reported for informational purposes. Also, if you're getting the Premium Tax Credit for marketplace insurance, make sure you have your Form 1095-A handy when you file. You'll need that to reconcile any advance premium tax credits you received.

My employer does the exact same thing and I've been filing like this for 3 years now. Just enter both W-2s separately in TurboTax. The marketplace one won't increase your federal taxable income since those premiums are exempt from federal tax. The system knows how to handle it based on the fact that Box 2 (federal withholding) is empty. Make sure you're also getting your Form 1095-A from the marketplace. That's a separate form you'll need for the Premium Tax Credit portion of your return.