How no tax on tips, extra 65+ deductions and more will change 2026 W-2, W-4

Wondering how the new mega tax law will affect your paycheck and taxes? Some of the answers lie in the new W-2 form employees will start getting for tax year 2026.

The IRS recently released drafts of the new W-2 form workers will receive and W-4 form they use to calculate tax withholding for each pay period. The draft form doesn’t apply for 2025, although the provisions on tips and overtime pay apply. The IRS said it’ll provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payers subject to the new reporting requirements.

The new forms show how new laws, such as no tax on tips and overtime, will be accounted for. So, what can Americans expect when they start filing with these new forms?

“There will likely be more paperwork, more calculations and more complexity,” said Rob Burnette, investment adviser representative and professional tax preparer at Outlook Financial Center.

What’s new on the W-2?

Their main change is in Box 14. After the tax bill, Box 14 is split into 14a and 14b.

Box 14a will likely be used similarly to prior years, Burnette said.  Your employer reports anything here that doesn't fit anywhere else. Examples include state disability insurance taxes withheld, union dues, health insurance premiums deducted, and nontaxable income. Box 14b is labeled “Treasury tipped occupation code” to account for those who qualify to receive no tax on tips. The IRS will provide a list in October of those occupations that “customarily and regularly (receive) tips on or before December 31, 2024.” If you qualify, your occupation code goes here.

Box 12 hasn’t changed, but three new codes are available for this box due to the One Big Beautiful Bill Act:

TA – Employer contributions to Trump accounts. Up to $5,000 annually can be contributed to the account, adjusted for inflation, for children. Employers can contribute up to $2,500, which would not be taxable. TP – Total amount of tips subject to the deduction for the no tax on tips provision, effective 2025 through 2028. Maximum annual deduction is $25,000 per person, and the deduction for self-employed taxpayers can’t exceed their net income before the deduction from the work in which the tips were earned. The deduction phases out with modified adjusted gross income over $150,000 ($300,000 for joint filers). TT – Overtime pay subject to the deduction for the no tax on overtime provision through 2028. The maximum annual deduction is $12,500 ($25,000 for joint filers) and phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

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Are there any changes on other forms to look out for?

The W-4 form employees use to calculate their withholdings will also look a little different, with new deductions listed on the worksheet, which has moved to Page 4 from 3.

Step 4(b) of the deductions worksheet explicitly includes:

Qualified tip income (up to $25,000) Overtime compensation (up to $12,500, or $25,000 if married filing jointly) New car-loan interest (up to $10,000) Additional amount for seniors (65+) ($6,000 each; a second $6,000 if the spouse is also 65+ with a valid Social Security number) Cash gifts to charities. If you take the standard deduction, enter cash contributions (up to $1,000; $2,000 if married filing jointly)

Instead of asking for total itemized deductions, the form has separate lines for:

Medical/dental expenses exceeding 7.5% of adjusted gross income (the form uses the term “income” but it’s based on AGI, said Richard Pon, a certified public accountant in San Francisco). State and local taxes up to $40,400 (the 2026 amount indexed for inflation), Home mortgage interest, Charitable gifts in excess of 0.5% of AGI (the form uses the term “income” but it’s based on adjusted gross income, Pon said). And the standard-deduction/limitation math at the end of the worksheet. Several tax laws include limitations that can affect the numbers you use on the worksheet.U.S. Secretary of the Treasury Scott Bessent adds “No Tax On Tips” to his receipt during a Labor Day visit to McLean Family Restaurant in McLean, Virginia, U.S., September 1, 2025. REUTERS/Brian Snyder

Are there any new forms to look for?

A new Schedule 1-A, not yet released but attached to Form 1040, will debut for employees to claim deductions related to the three new W-2 codes for Box 12 and deductions on the W-4.

What does this all mean for taxpayers?

“If you are doing your tax return yourself, be patient with the new rules and ensure you are complying with the rules as written,” Burnette said. “If you aren’t sure, reach out to a professional tax preparer, use a DIY software package if your return isn’t complex or take your chances on your own filing a paper return,” though that’s not recommended.

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

This article originally appeared on USA TODAY: How 2026 W-2, W-4 forms will change to account for Trump tax law

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