What does W-2 Box 12 Code Q represent?

W-2 Box 12 Code Q specifically indicates the amount of nontaxable combat pay received by the employee. This is an important designation because combat pay is typically excluded from taxable income, thereby reducing the overall tax liability for military personnel. Understanding this code is essential for both tax preparers and taxpayers who may be navigating their tax filing, especially in recognizing which types of income are taxable and which are not.

The distinction of combat pay as nontaxable is particularly relevant for members of the armed forces who may be deployed in combat zones, allowing them to retain more of their earnings. The correct classification helps ensure that taxpayers don’t accidentally include this amount in their taxable income, which could lead to incorrect tax filings or overpayments.

Other codes in Box 12 represent different types of compensation or contributions, but they do not pertain to nontaxable combat pay, making Code Q unique for military personnel.