What type of benefits does W-2 Box 12 Code Q describe?

W-2 Box 12 Code Q specifically pertains to non-taxable combat pay. This code is used to report the amount of pay earned by members of the military who serve in a combat zone, which is not subject to federal income tax. This is an important distinction for military personnel, as it allows them to retain more of their earnings during periods spent in combat.

Non-taxable combat pay is significant because it enables service members to save on taxes during their deployment, effectively recognizing the sacrifices they make while serving in active combat. Understanding this code is essential for accurate tax reporting and for ensuring that eligible service members benefit from the tax exemptions intended for them.

The other types of benefits mentioned do not fit the description of Code Q on the W-2 form. Taxable charity donations would be handled differently, employee salary reduction contributions relate to deferred compensation or benefits like flexible spending accounts, and employer contributions to a retirement plan typically have other designated codes on the W-2.