What does it mean if my W-2 has an amount and code II in box 12?

If your W-2 has an amount and code II in box 12, the enrollment documents that you completed indicated that you qualified for the Difficulty of Care tax exemption (IRS Notice 2014-7). IRS Notice 2014-7 provides that certain Medicaid waiver payments are excludable from federal and state income tax.
If an employee qualifies for this exemption, no wages are reported in box 1 of the W-2 and federal and state income taxes are not withheld.
New for 2025 W-2s, code II in box 12 is used to report Medicaid waiver payments which were excluded from federal and state income taxes.
If your 2025 W-2 includes code II in box 12, we recommend you contact a tax professional. Consumer Direct Care Network cannot provide tax advice.