IRS Reveals Plan to Update Form W-4 for 2026: Here’s a Recap

The 2026 Form W-4 will look different from this year’s form if the IRS finalizes the early release draft it unveiled this summer.

Some, but not all, of the updates are the result of the One Big Beautiful Bill Act (OBBBA). The W-4 isn’t the only form getting a fresh look due to the OBBBA: The IRS recently released plans to revise Form W-2 as well.

Here’s a summary of the changes that you and employees may see on next year’s W-4.

Changes to Step 3

First, in Step 3 of the 2026 W-4, the tax credits would be broken down into line 3a and line 3b.

Here’s how employees could use these lines:

• Line 3a is for qualifying children under age 17 – the IRS didn’t include a dollar amount in the 2026 draft (currently, it’s $2,000), and
• Line 3b is for other dependents – the dollar amount listed is $500, no change from 2025.

Changes to Step 4

Next, Step 4 of Form W-4, as proposed on August 21, 2025, would instruct employees to fill out the Deductions Worksheet and then enter the results on the form. Those instructions aren’t changing.

However, the worksheet itself would be expanded to include deductions added by the OBBBA. For example:

• Line 1 of the Deductions Worksheet is where employees would incorporate deductions for: tip income (1a); overtime compensation (1b); and new car loan interest (1c).
• Line 3 of the Deductions Worksheet would apply to seniors who are age 65 or older, with a $6,000 deduction for one taxpayer and another $6,000 for the taxpayer’s spouse.
• Line 6 of the Deductions Worksheet would be for itemized deductions such as medical and dental expenses.

Also in Step 4 of the draft version of the 2026 W-4, employees who wish to claim they’re exempt from withholding would need to check a box.

By doing so, they’d agree the following: I claim exemption from withholding for 2026, and I certify that I meet both of the conditions for exemption for 2026 … I understand I will need to submit a new Form W-4 for 2027.

Reminder about IRS Draft Forms

As you might expect, the early release draft of Form W-4 is for informational purposes only and shouldn’t be used. The IRS includes that word of caution on the form’s cover sheet.

The final version of the 2026 W-4 is expected in the coming months.