Focused on U.S. individual taxpayers • Practical payroll & W-4 guidance you can use
Quick Take — 2025 vs. 2026
- 2025 (status quo): No changes to federal income tax withholding tables or core payroll forms for TY 2025—keep using Publication 15-T (2025) and current procedures.
- 2026 (watchlist): IRS will refresh guidance, forms, and processes for TY 2026, including how tips and overtime interact with withholding and year-end reporting.
- New deductions, old mechanics (for now): Above-the-line deductions for qualified tips and qualified overtime begin under 2025 law; payroll mechanics are expected to be reflected in 2026 materials.
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1) What stays the same for 2025
- Withholding tables: No OBBBA-specific changes for TY 2025; use 2025 tables/methods in Publication 15-T (2025).
- Forms & reporting: W-2, 1099 series, and 941 remain as-is for 2025.
- How to compute withholding: Keep relying on Pub. 15, Pub. 15-T, Pub. 505, and the IRS Tax Withholding Estimator.
2) What changes in TY 2026 (implementation watchlist)
A. Withholding tables & procedures
Expect updated withholding instructions and tables in 2026 to reflect new deductions and reporting requirements.
B. Reporting of tips & overtime
Anticipate clarifications to information returns and instructions for how tips and overtime will be shown for TY 2026.
C. New above-the-line deductions (law already effective)
- “No Tax on Tips” deduction: Above-the-line deduction for qualified tips (subject to statutory limits) for 2025–2028.
- “No Tax on Overtime” deduction: Above-the-line deduction for qualified overtime pay (caps/phaseouts) for 2025–2028.
D. Updated W-2/1099 instructions
Watch for 2026 form packages and the General Instructions for any new codes or lines tied to tips/overtime.
3) W-4 & paycheck moves for individuals
- For 2025: If tips or overtime vary, use the IRS Tax Withholding Estimator and adjust Step 4(c) for extra withholding as needed.
- For 2026: When new instructions are published, revisit your W-4 to reflect eligibility for tip/overtime deductions and to avoid under-withholding.
- Side jobs & 1099s: Review estimated tax using Pub. 505 and consider quarterly payments to prevent penalties.
4) Employers & payroll: readiness checklist
2025 (hold steady)
- Continue using 2025 withholding procedures per Pub. 15-T; don’t re-code for new deductions yet.
- Ensure accurate tip reporting (including Form 4137 when applicable).
2026 (prep & adapt)
- Update payroll systems when 2026 tables/instructions are released.
- Watch for the IRS list of tipped occupations and any new data fields/codes on 2026 forms.
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5) Key dates & timeline
Now through Dec 2025
- Payroll runs use current Pub. 15-T (2025); no OBBBA-specific table changes.
- IRS to finalize supporting materials (e.g., tipped-occupation list) tied to 2025 law.
Early 2026
- Updated withholding guidance/forms and reporting instructions for tips & overtime.
- Refresh employee W-4 guidance and employee-facing resources (Estimator, FAQs).
6) FAQs
Will my 2025 paycheck change because of the new law?
No—from withholding mechanics alone, 2025 stays the same. You can still adjust your W-4 if you want a larger/smaller refund.
What exactly will change in 2026?
Expect updated withholding tables/instructions and year-end reporting to reflect the 2025 law’s tips and overtime provisions.
Where can I run my own numbers?
Use the IRS Tax Withholding Estimator and Pub. 505 to plan for multiple jobs, tips, or variable overtime.
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This article summarizes current IRS implementation expectations as of August 16, 2025. Official 2026 details will be finalized in IRS publications and instructions. This is general information for U.S. individuals, not tax advice—consult your tax professional.
