Why is Box 5 bigger than Box 1 on my W2? Something wrong?

This is actually pretty common and usually not a mistake! Box 1 shows your taxable wages for federal income tax purposes, while Box 5 shows your Medicare wages. They can differ for several legitimate reasons: The most common reason is pre-tax deductions like traditional 401(k) contributions, health insurance premiums, or FSA contributions. These reduce your Box 1 amount but don't reduce your Box 5 amount since you still pay Medicare tax on those dollars. For example, if you contributed $5,800 to a 401(k) this year but didn't last year, that would explain the exact difference you're seeing. Or maybe you increased your health insurance coverage or started contributing to an FSA. Look at your final paystub of the year and check for pre-tax deductions - the total should approximately match the difference between Box 1 and Box 5.

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I'm an HR coordinator and see this question all the time! Here's a simplified breakdown of what typically causes Box 5 to be higher than Box 1: Box 1 (Wages, tips, other compensation) = Gross wages MINUS pre-tax deductions like: - 401(k)/403(b) contributions - Health insurance premiums - FSA/HSA contributions - Commuter benefits Box 5 (Medicare wages and tips) = Gross wages with FEWER deductions taken out So if your Box 5 is $5,800 higher, it means you had about $5,800 in deductions that reduce federal income tax but not Medicare tax.

Does anyone know if state taxes follow Box 1 or Box 5 numbers? My state tax seems higher than it should be and I'm wondering if they're calculating based on the Box 5 amount instead of Box 1.

This is a great question and totally understandable confusion! As others have mentioned, the difference between Box 1 and Box 5 is usually due to pre-tax deductions. Since you mentioned this is the first year you've seen this difference, it sounds like you may have started or increased contributions to things like a 401(k), health insurance, or flexible spending account. To verify everything is correct, I'd recommend checking your final paystub from December 2024. Look for any "pre-tax" deductions and add them up - that total should roughly match the $5,800 difference between your boxes. Common culprits are: - Traditional 401(k) contributions (very common if you got a raise and decided to save more) - Health/dental/vision insurance premiums - Flexible Spending Account (FSA) or Health Savings Account (HSA) contributions - Dependent care assistance If the math doesn't add up or you can't find deductions that explain the difference, then it would be worth contacting HR. But in most cases, this difference is completely normal and actually beneficial since those pre-tax deductions reduce your federal income tax liability!