Every January, USPS employees receive a W-2 that summarizes their earnings and tax withholdings for the prior year. For most postal workers, it’s the most confusing document they see all year — especially if overtime, COLA adjustments, night differential, and TSP contributions are all in the mix. This guide breaks down exactly what each box means and which deductions you should know about.
Where to Get Your W-2
USPS W-2s are available electronically through LiteBlue (liteblue.usps.gov) → myHR → Employee Self Service → W-2 Information. Paper copies are mailed by January 31 each year. If you’ve separated from USPS, you can request a copy through the National Finance Center (NFC) at 866-767-6738 or through the NFC Employee Personal Page (EPP) website.
Reading Your W-2: The Key Boxes
| Box | What It Shows | What to Know |
|---|---|---|
| Box 1 | Wages, tips, other compensation | Your taxable income after pre-tax deductions (TSP traditional, PSHB premiums). This is usually less than your gross pay. |
| Box 2 | Federal income tax withheld | What USPS sent to the IRS on your behalf. Compare this to your actual tax liability to see if you’ll get a refund or owe. |
| Box 3 | Social Security wages | Subject to the 6.2% OASDI tax. Capped at $168,600 for 2025 (for the 2025 tax year W-2). |
| Box 5 | Medicare wages | Subject to 1.45% Medicare tax. No cap — all earnings are taxed. High earners pay an extra 0.9% above $200K. |
| Box 12 | Various coded items | The most confusing box. See the breakdown below. |
| Box 14 | Other | USPS uses this for union dues, FERS retirement contributions, and other items. Labels vary. |
Box 12 Codes for Postal Workers
Box 12 uses letter codes to identify specific types of compensation or deductions. These are the ones most commonly seen on USPS W-2s:
| Code | Description | What It Means for You |
|---|---|---|
| D | Traditional TSP contributions | The amount you contributed to your traditional (pre-tax) TSP. Already excluded from Box 1. |
| AA | Roth TSP contributions | After-tax TSP contributions. Included in Box 1 because you already paid tax on them. Withdrawals in retirement are tax-free. |
| W | HSA contributions | If enrolled in a PSHB high-deductible plan with an HSA. |
| DD | Cost of employer health coverage | Informational only — total value of your health plan. Not taxable, not a deduction. Don’t enter this on your tax return. |
| C | Group-term life insurance over $50K | Taxable benefit for coverage above $50,000. Small amount, but it’s included in your income. |
Box 14: FERS Contributions and Union Dues
USPS reports several items in Box 14 that are important for your tax return:
FERS retirement contributions — typically labeled “CSRS” or “FERS” or “Ret” in Box 14. FERS-FRAE employees contribute 4.4% of base pay. These contributions are after-tax (they’re included in Box 1), which means a portion of your retirement annuity will be tax-free when you start collecting it. This is the “cost recovery” that reduces your taxable pension income in retirement.
Union dues — NALC, APWU, NPMHU, or NRLCA dues appear here. Since the 2017 Tax Cuts and Jobs Act, union dues are not deductible on federal tax returns for most employees. However, some states still allow a deduction for union dues on state returns, so check your state’s rules.
How Overtime, COLA, and Premium Pay Affect Your Taxes
Overtime is taxed as regular income. There’s a common misconception that overtime is “taxed at a higher rate.” It isn’t — but because your total income is higher, more of your earnings may fall into a higher marginal tax bracket. If you’re a carrier who works significant overtime, your effective tax rate for the year may be higher than a colleague with the same base pay but no overtime. See our overtime guide for how OT pay is calculated.
COLA adjustments increase your base pay, which increases your taxable income. A COLA of $1,400 per year adds roughly $1,400 to your Box 1 — minus any increase in pre-tax deductions.
Night differential and Sunday premium are both taxable income reported in Box 1. See our night differential guide for current rates.
Retro pay (like the April 2026 APWU retro payment) is taxable in the year you receive it, not the year it was earned. If you received a large retro payment, it will appear in your Box 1 for that tax year and could push you into a higher bracket.
Common Deductions Postal Workers Miss
Uniform expenses — carriers and other employees required to wear USPS uniforms can deduct unreimbursed uniform costs only if they exceed their annual uniform allowance. Since the 2017 tax law eliminated the miscellaneous itemized deduction for most employees, this deduction is generally not available on federal returns. However, some states still allow it.
TSP contributions — if you’re contributing to a traditional TSP, those contributions already reduce your Box 1 taxable income. You don’t deduct them again on your tax return. If you’re contributing to a Roth TSP, you pay taxes now but withdrawals in retirement are tax-free — a valuable benefit if you expect to be in a higher bracket later.
Military service credit buyback — if you’re a veteran who bought back military time for FERS credit, those payments may be deductible or recoverable over time in retirement. See our military buyback guide for details.
Traditional vs. Roth TSP: Tax Implications
The choice between traditional and Roth TSP has significant tax implications. With traditional TSP, contributions reduce your taxable income now (lowering your current tax bill), but withdrawals in retirement are fully taxed as ordinary income. With Roth TSP, you pay taxes on contributions now, but all growth and withdrawals in retirement are completely tax-free.
For most postal workers in mid-career earning $55,000–$75,000, a split strategy often makes sense: contribute enough to traditional TSP to stay in a comfortable tax bracket, and put additional contributions into Roth. This gives you tax diversification in retirement — some taxable income from traditional TSP and your FERS pension, and some tax-free income from Roth. See our TSP fund guide for allocation strategies.
State Tax Considerations
Federal employees living in different states face different state tax situations. Nine states have no state income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, your USPS income is only subject to federal taxes.
Several states exempt all or part of federal pension income from state taxes, which matters when you retire. If you’re planning a move in retirement, the state tax treatment of your FERS annuity and TSP withdrawals can make a significant difference in your take-home income.
See how taxes and deductions affect your actual take-home pay.
Open Take-Home Pay Calculator →Disclaimer: This guide is for educational purposes only and is not tax advice. Tax situations vary by individual. Consult a qualified tax professional for advice specific to your circumstances.