Payroll & tax Verified

2026 Form W-4 adds deductions for qualified tips and overtime (Step 4(b))

Jurisdiction
Federal (US)
Effective date
2026-01-01
Who it covers
All employers that withhold federal income tax
Status
Verified against an official source

The law, summarized

  • The 2026 Form W-4 Step 4(b) worksheet lets employees estimate deductions for qualified tips (up to $25,000) and qualified overtime (up to $12,500, or $25,000 married filing jointly), subject to income limits.
  • Employers must use an employee's updated W-4 if submitted, and Publication 15-T withholding methods.
  • Tips and overtime remain subject to Social Security and Medicare tax.
StateHR Take · AI-generated analysis, not legal advice

Who should act: All employers that withhold federal income tax with workers in Federal. Confirm your payroll system and W-4/W-2 processes handle this change now (in effect since 2026-01-01). Confirm the details in the official source before acting.

Generated 2026-10-15T18:41-05:00

Official sources