Definition
The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, created four new deductions that reduce federal taxable income whether or not you itemize (they are taken after AGI), each with an income limit. On the 2026 Form W-4 they go on the Step 4(b) Deductions Worksheet:
1. Tips: up to $25,000 of qualified tips (total income under $150,000; $300,000 if married filing jointly), worksheet line 1a. 2. Overtime: up to $12,500 ($25,000 if married filing jointly) of the 'and-a-half' premium part of overtime pay, same income limits, line 1b. 3. Seniors: $6,000 for you and $6,000 for your spouse if 65 or older (total income under $75,000; $150,000 if married filing jointly), lines 3a and 3b. 4. Car loan interest: up to $10,000 of interest on a loan for a new, U.S.-assembled personal vehicle (total income under $100,000; $200,000 if married filing jointly), line 1c.
Importantly, none of these deductions reduce FICA taxes — they only reduce federal income tax withholding.
How this affects your W-4
On the paper W-4, put them on the Step 4(b) Deductions Worksheet. In this calculator, enter them in the '2026 OBBBA Deductions' section (between Step 3 and Step 4); the calculator applies the same dollar caps and income limits as the W-4 worksheet (for married filing jointly it only sees this job's pay). Each deduction reduces your taxable income before bracket calculations are applied, lowering your per-paycheck withholding.
The calculator shows a before/after comparison of your withholding with and without OBBBA deductions so you can see exactly how much more take-home pay you should be receiving.
See how obbba deductions affects your withholding
Use the free W-4 calculator to calculate your exact withholding with your specific situation.
Open the W-4 Calculator →Read the guide
No Tax on Tips, Overtime, Seniors and Car Loans: 2026 W-4 Cheat Sheet
All four new deductions side by side: caps, income limits, phase-outs, and the Deductions Worksheet line for each.
How the 2025 Tax Law (OBBBA) Changes Your 2026 W-4 Withholding
The One Big Beautiful Bill Act (signed 2025) added deductions for tips, overtime, seniors and car loan interest. Here is where each goes on your 2026 W-4.
Related terms
Tip Income Exclusion
An OBBBA deduction for up to $25,000 of qualified tips (with income limits), reducing federal income tax but not FICA.
Overtime Exclusion
An OBBBA deduction for up to $12,500 of the premium ('and-a-half') part of overtime pay, with income limits.
Above-the-Line Deduction
A deduction taken from gross income to arrive at AGI — available whether or not you itemize.