2026 Form W-4 and the New Tax Deductions

The 2026 version of Form W-4, Employee’s Withholding Certificate, looks the same as the prior-year version. However, the instructions now include information about the new deductions for tips, overtime and car loan interest, along with the new senior deduction. Taxpayers eligible for one or more of these deductions can make adjustments to their withholding on line b of Step 4 of the form, which is the line for other adjustments, deductions.

If a client is eligible for one or more of these new deductions, they must decide if they want to lower their federal withholding for the 2026 tax year to reflect the new deduction or leave their withholding as is, which would be expected to result in a larger refund when the client files the 2026 income tax return next year.

Practitioners should warn clients who want to lower their withholding that they may end up owing tax or getting a smaller refund than expected, if their income from tips or overtime in 2026 is different than what they expected.