W-2 box 12 code FF.

What code FF means

IRS description: Code FF: Permitted benefits under a qualified small employer health reimbursement arrangement. Use this code to report the total amount of permitted benefits under a QSEHRA.

A QSEHRA lets a small employer pay or reimburse medical expenses after the employee shows proof of coverage. The W-2 does not report cash that reached you. The IRS gives the clearest example: if the plan offers a permitted benefit of $3,000 and you were reimbursed $2,000, the employer reports a benefit of $3,000 with code FF. The benefit you left unused is still the number on the W-2. Carryover amounts from prior years are not included.

The amount is prorated in two situations the IRS spells out. If you became eligible mid-year and the plan prorates by month, a $3,000 benefit with eligibility starting May 1 is reported as $2,000 ($3,000 × 8/12). If the plan year is not the calendar year, the employer adds the prorated portions: a plan paying $2,000 from April 2025 to March 2026 and $3,000 from April 2026 reports $2,750 for 2026.

Where code FF shows up on your W-2 and return

• Box 1: the permitted benefit is not reported as wages. Only specific taxable reimbursements are added to boxes 1, 3 and 5.
• Taxable exceptions: the IRS says reimbursements of over-the-counter drugs bought without a prescription, or premiums for a group health plan sponsored by your spouse's employer, are included in boxes 1, 3 and 5. The code FF figure still shows the full permitted benefit.
• Lapse in coverage: if you did not have minimum essential coverage for a month and were reimbursed anyway, that reimbursement is taxable to you and reported in box 1 only.
• Form 1040: code FF is a reporting figure. Use box 1 as reported.

Worked example

The plan offers $3,000 a year and you became eligible May 1. Prorated by month, the benefit is $3,000 × 8/12 = $2,000, so the W-2 shows FF 2000.00, whether you used $500 or all $2,000. If you were also reimbursed $150 for over-the-counter medicine, that $150 is taxable and is included in boxes 1, 3 and 5, while code FF stays at $2,000.

Limits and what to check

The IRS says the maximum QSEHRA reimbursement for an eligible employee in 2026 is $6,450 for self-only coverage and $13,100 if the arrangement also reimburses family members. A code FF higher than that is worth questioning with the employer. If your benefit varies by family size or age and you submitted no proof of coverage, the IRS tells employers to report the highest-value benefit the plan provides, and to correct it with a W-2c if you later prove coverage for a lesser benefit. Keep your plan documents, since the W-2 does not break the benefit down by month.

Common mistakes

• Reading code FF as money paid to you. It is the benefit available, not the reimbursements received.
• Treating the full FF amount as taxable. Only certain reimbursements (for example OTC drugs) are added to boxes 1, 3 and 5.
• Forgetting proration when you joined mid-year or the plan year is not the calendar year.
• Expecting prior-year carryover to be included. The IRS says it is not.

See every code in one searchable table on the W-2 box 12 codes lookup.

Sources

Primary sources opened on November 1, 2026. The plain-English parts of this page are our summary of them, not IRS guidance.

• IRS, General Instructions for Forms W-2 and W-3 (2026), Box 12, Codes (read 2026-11-01): code FF definition, the 2026 maximums, the proration examples and the taxable exceptions