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Use Form W-4 to get the new deductions in your paycheck

By default you only see the tips and overtime deduction at tax time. The 2026 Form W-4 lets you spread it across the year instead.

By Rogger Taipe · Updated October 12, 2026 · Tax years 2025 and 2026 · Based on IRS guidance

Employers keep withholding income tax on tips and overtime as usual. The new deductions only lower your tax when you file, usually as a bigger refund. If you'd rather have the money during the year, the 2026 Form W-4 has new lines for exactly this.

Step by step

  1. Estimate your deductions for the year. Use the all-deductions calculator or the individual calculators. Be conservative: if you overestimate, you could owe at tax time.
  2. Open the Step 4(b) Deductions Worksheet on page 4 of the 2026 Form W-4.
  3. Enter qualified tips on line 1a (up to $25,000), qualified overtime on line 1b (only the premium, up to $12,500 or $25,000 joint) and car loan interest on line 1c (up to $10,000). These lines apply if your total income is under $150,000 ($300,000 joint) for tips and overtime, or under $100,000 ($200,000 joint) for car loan interest.
  4. Enter the senior deduction on lines 3a and 3b if you or your spouse is 65 or older ($6,000 each, if income is under $75,000 or $150,000 joint).
  5. Finish the worksheet and copy the result to Step 4(b) of the W-4.
  6. Give the new W-4 to your employer. Not to the IRS. It usually takes effect within one or two pay periods.
Above the income limits on the worksheet, the deductions shrink. In that case, enter a smaller estimate rather than the full amount, or leave it out.

Example

A single bartender expects $18,000 of qualified tips in 2026 and is in the 12% bracket. Entering $18,000 on line 1a reduces withholding by roughly $18,000 × 12% = $2,160 over the year, about $83 more per paycheck if paid every two weeks. Without a new W-4, the same $2,160 would arrive as part of a refund in 2027.

Is it worth it?

  • Yes if your tips or overtime are steady and you'd rather have the money now.
  • Maybe not if your hours swing a lot, you have more than one job, or you like getting a refund. An overestimate means a bill in April.
  • Check your pay stubs after a month or two and adjust if needed. You can submit a new W-4 at any time.

Common questions

Where do I put tips and overtime on the 2026 W-4?

On the Step 4(b) Deductions Worksheet: line 1a for qualified tips and line 1b for qualified overtime. The worksheet total goes to Step 4(b).

Do I send the W-4 to the IRS?

No. Give it to your employer's payroll or HR department.

What happens if I overestimate?

Too little tax will be withheld and you may owe when you file. Use a conservative estimate and review your withholding during the year.

All four togetherSee your total Schedule 1-A savings in one place.Open calculatorNo tax on overtimeDeduct the half-time premium, up to $12,500 or $25,000 joint.Open calculatorNo tax on tipsDeduct up to $25,000 of qualified tips.Open calculator

Sources

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