What CAFE 125 benefits do I have to manually add into my income for NJ return? I work in NY and have health/dental/vision/FSA/commuter deductions.

[MaryK4]

In general, most cafeteria 125 benefits are taxable income in New Jersey.  The exceptions are very narrow- if you read the link below and can add more details, please add a comment. See NJ Cafeteria Plans.

[mikjon]

The link you included does not work. I have health/dental/vision/FSA/commuter... Do I have to add ALL of those to my NJ income?

[MaryK4]

I updated the link so it should work now.  Please try again and add details if you have questions. 

@mikjon

[mikjon]

Ok so my understanding after reading the document is that my full 3245 (2600 FSA + 645 Commuter) must be included as income on my NJ return on the "Adjustments to W2 wages" page correct? Should I then also enter 5,174 in my "Medical Expense" deduction for NJ which is for my premiums paid for health/dental/vision? Also, it looks like for NY the CAFE 125 is tax exempt according to my W2 reported wages, however the health/dental/vision are not correct?

[MaryK4]

The New Jersey add-back of cafeteria plan benefits to Gross Income applies to any of the benefits that were tax-free for the federal income tax.  If the Health/Dental/Vision were not included as part of the cafeteria plan you would not add those back.  For example, many employers offers the health insurance to everyone and pays a portion and you pay part of the premiums pretax.  Some allow the premium portion for the employee to be paid by their cafeteria plan- this would be included.  (Look specifically for the benefits you received in the plan.)  @mikjon

[KarenJ2]

Generally your payroll department would add back pretax items like HSA contributions to your NJ wages when your W-2 is printed.  You can confirm that with your Company payroll department.

If your employer added the HSA contributions back to state income in box 16 of your W-2 , then you do not need to add this amount on your NJ return.

For federal purposes, HSA contributions made through the employer, are removed from wages in box 1,box 3 and box 5 of your federal wages. 

[mikjon]

Hi thanks for the feedback. I am sorry but I am confused since my W2 is printed for NY state income tax not NJ. For NY the reported wages is matching my Federal, which excludes the full cost of my health/dental/vision/fsa/commuter. I am still confused if I should be adding just the FSA amount of 3,245 to my NJ wages while at the same time including the 5,174 on my medical deductions for NJ?

[JosephF8]

Yes you would add back those CAFE 125 benefits back in for NJ.

You would then take all your Medical expenses as a deduction.

This includes premiums paid on your NJ return.

[tbxuser]

Similar situation as the original poster.  Live in NJ and work in NY (box 1 and 16 are same amount). 

To clarify, "For 'other wage adjustments - w-2", I need to;

- Report all Cafe 125 contributions (health care premium/dental/vision/fsa/commuter) as wage

Medical Expenses

- Report health care premium as Medical Deduction under "New Jersey medical insurance premiums included in your New Jersey wages but not in your..."

Is this correct?

[AbrahamT]

Yes, as long as Box 1 and 16 are the same amount, meaning that the Cafe contributions are not added back to NJ already on your original W2 in that Box 16 for NJ state wages. And then take  the  full amount of the medical insurance premiums including the amount of the cafe 125 contribution paid as as a medical deduction under NJ medical insurance premiums. 

[thiggins002]

My wife contributes $120 per pay check pre-tax for our family's health insurance premium. This amounts to $3,000 for the 2022 tax year. It's pre-tax for federal purposes; therefore, it's currently not included in the Box 1, Box 3 and Box 5 on Form W-2. 

Does this $3,000 need to be added back to income for NJ income tax purposes? If so, why is that the case? Are normal health care premiums usually post tax?

Is it possible that the NJ wages (Box-17) already includes this $3,000? Upon reviewing the W-2, it appears to be the case. If so, then this would not need to be an add back for NJ income tax purposes. 

Thanks in advance,

Tom

[DMarkM1]

If the amount of wages in box 16 is higher than the box 1 amount by the amount paid for premiums, then the add back has already occurred.  However, if boxes 16 and 1 match, the add back has not occurred and you would accomplish that in the NJ state interview and then take a medical deduction for that premium paid amount. 

Healthcare premiums paid could be either or a combination of pretax and post-tax.  The pretax amounts are excluded from income tax and employment taxes (social security/medi-care) and thus not an itemized deduction.  The post-tax amounts are initially included for income taxes and employment taxes and then can be used as an itemized medical deduction from income taxes.