What’s New

2026 federal income tax withholding tables. The 2026 federal income tax withholding tables in this publication have been updated for changes made by P.L. 119-21, commonly known as the One Big Beautiful Bill Act, including the permanent extension of individual tax rates, the permanent extension of the increased standard deduction, and the permanent termination of personal exemptions, which were all originally enacted by the Tax Cuts and Jobs Act (P.L. 115-97).

2026 Form W-4. Form W-4, Employee’s Withholding Certificate, has been updated for 2026 to account for new federal income tax deductions under P.L. 119-21 that are available to employees when they file their income tax returns. The 2026 Form W-4 was also updated to add a new checkbox below Step 4(c) for an employee to claim exemption from federal income tax withholding. Previously, the employee wrote “Exempt” below Step 4(c).

2026 Form W-4P. Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, has been updated for 2026 to account for new federal income tax deductions under P.L. 119-21 that are available to payees when they file their income tax returns. The 2026 Form W-4P was also updated to add a new checkbox below Step 4(c) for a payee to request no federal income tax withholding. Previously, the payee wrote “No withholding” below Step 4(c).

Withholding on qualified tips. For tax years beginning after 2024 and ending before 2029, P.L. 119-21 allows employees and self-employed individuals to deduct up to $25,000 of qualified tips received in occupations that customarily and regularly received tips on or before December 31, 2024, on their income tax returns. Qualified tips are cash tips, which include voluntary cash or charged tips received from customers or, in the case of employees, through tip-sharing arrangements. Mandatory service charges added to the bill are not qualified tips. Employers must use an employee’s updated Form W-4, if one is submitted by the employee, and the federal income tax withholding procedures in this publication to allow the employee to account for their expected deduction and receive more money in each paycheck instead of waiting until filing their income tax return to receive the full benefit of this deduction. Tips are still generally subject to both the employer share and employee share of social security tax and Medicare tax if the tips received are $20 or more per month.Employers and other payers must file information returns (for example, Forms W-2, 1099-MISC, and 1099-NEC) with the Social Security Administration (SSA) or IRS, as applicable, and furnish statements to tip recipients showing cash tips received and the Treasury Tipped Occupation Code(s) of the tip recipient. However, the IRS has provided transition relief to employers and payers for the tax year 2025 reporting requirements. For more information, see Notice 2025-62, 2025-48 I.R.B. 740, available at IRS.gov/irb/2025-48_IRB#NOT-2025-62 .

Withholding on qualified overtime compensation. For tax years beginning after 2024 and ending before 2029, P.L. 119-21 allows individuals (employees and other workers not treated as employees) to deduct up to $12,500 ($25,000 if married filing jointly) of qualified overtime compensation on their income tax returns. Qualified overtime is compensation that exceeds the regular rate of pay (such as the “half” portion of time-and-a-half compensation) that is required to be paid to an individual under section 7 of the Fair Labor Standards Act (FLSA) of 1938. The FLSA provides that employers must generally pay covered, nonexempt employees at least one-and-a-half times their regular rate of pay for hours worked over 40 hours per week. For more information about overtime compensation, go to dol.gov/agencies/whd/overtime . Employers must use an employee’s updated Form W-4, if one is submitted by the employee, and the federal income tax withholding procedures in this publication to allow the employee to account for their expected deduction and receive more money in each paycheck instead of waiting until filing their income tax return to receive the full benefit of this deduction. Overtime compensation is still generally subject to both the employer share and employee share of social security tax and Medicare tax.Employers and other payers must file information returns (for example, Forms W-2, 1099-MISC, and 1099-NEC) with the SSA or IRS, as applicable, and furnish statements to overtime recipients showing qualified overtime compensation paid during the year. However, the IRS has provided transition relief to employers and payers for the tax year 2025 reporting requirements. For more information, see Notice 2025-62 .