The IRS has signaled that 2026 will bring a set of tax changes that many workers in the United States 🇺🇸 will feel in their paychecks, especially people in tip-heavy jobs, workers who rely on overtime, and families trying to save more for retirement. The changes apply to the 2026 tax year—money earned in 2026 and generally reported on returns filed in 2027—and the agency says they are driven by inflation adjustments and the One Big Beautiful Bill Act (OBBBA, P.L. 119-21), a law that reshapes several worker-facing deductions and withholding rules.
For immigrants, these updates land in a familiar pressure point: taxes are often one of the few systems where day-to-day work, legal status, and paperwork meet. Many noncitizens file and pay taxes every year, including lawful permanent residents, people on temporary work visas, international students with U.S. income, and others who may be in the middle of immigration cases while still earning wages.
A change that alters withholding or deductions can quickly mean the difference between getting a refund and owing money at filing time. That can matter for families already paying immigration legal fees, renewal costs, or sending money abroad.
New deductions from OBBBA: tips and overtime (2025–2028)
One of the biggest shifts is a new tips deduction created under OBBBA for 2025–2028, aimed at workers in “IRS-identified occupations.” The deduction applies to both employees and self-employed workers who receive qualified tips.
- Maximum amounts: Up to $12,500 per filer (or $25,000 for joint filers).
- Phase-outs: Begins phasing out at MAGI over $150,000 (or $300,000 for joint filers).
- Practical effect: Many restaurant and hospitality workers may see lower taxable income—if they fall within the IRS-designated occupations and their tips meet the agency’s “qualified” definition.
The same law creates an overtime-related deduction (also 2025–2028) for workers who regularly put in extra hours.
- Maximum amounts: Up to $12,500 per filer (or $25,000 for joint filers).
- Phase-outs: Same MAGI thresholds of $150,000 / $300,000.
- Important eligibility detail: The deduction “requires Social Security Number on return and joint filing if married,” per the IRS description. This will draw close attention in mixed-status households where one spouse lacks an SSN.
Withholding and Form W-4 changes
The IRS is tying these new deductions to withholding paperwork because the fastest way to feel a tax change is often through your weekly or biweekly paycheck.
- Workers should update their 2026 Form W-4 by entering estimated amounts in the deductions worksheet (Step 4(b)) to account for tips and overtime deductions.
- The IRS plans a new checkbox for withholding exemption, and employers will use draft 2026 withholding tables in Publication 15-T that reflect OBBBA.
- This can be a real shift for workers who have never adjusted withholding, including newly arrived immigrants learning the U.S. payroll system for the first time.
“Review your withholding now using the draft 2026 Form W-4 on IRS.gov, especially if you earn tips, overtime, or near phase-out thresholds.”
For official form instructions and updates, the IRS hosts the form here: Form W-4, Employee’s Withholding Certificate.
Key takeaway for immigrants: withholding is not just a tax detail — it shapes cash flow needed for rent, childcare, travel, immigration filing costs, and it can determine whether a worker faces an unexpected tax bill at filing time.
Retirement contribution limits (2026)
Retirement savers will see higher limits in 2026, which can matter for immigrants trying to build long-term stability.
- 401(k), 403(b), 457 employee limit: $24,500 (up $1,000 from 2025).
- Catch-up contributions (age 50+): $8,000 (total $32,500).
- Super catch-up (ages 60–63): $11,250 (total up to $35,750).
- IRA limit: $7,500, with a catch-up of $1,100.
- IRA deductible contribution phase-out (example): single filer covered by workplace plan at $81,000–$91,000.
- Saver’s Credit income limit: joint filers up to $80,500.
Why this matters for immigrants:
– Many arrive mid-career with fewer years to build U.S. retirement savings.
– Some send earnings abroad, so higher limits only help if the worker has access to an employer plan and can afford to lock up money long-term.
– For immigrants who later adjust status and plan to stay permanently, retirement assets can provide crucial financial cushion.
Standard deductions, tax brackets, and senior deduction
The IRS adjusted the basic building blocks that set a worker’s tax bill: standard deductions and tax brackets.
Standard deductions for 2026 (inflation-adjusted and boosted by OBBBA):
– Married filing jointly: $32,200 (up from $31,500 in 2025)
– Single or married filing separately: $16,100 (up from $15,750)
– Head of household: $24,150 (up from $23,625)
Additional amounts for people age 65+:
– Single: +$2,050
– Married (per qualifying spouse): +$1,650
New OBBBA “senior deduction”:
– $6,000 per person
– Phase-outs: Begins above $75,000 MAGI (single) and $150,000 (joint)
– Elimination: Fully phased out at $175,000 (single) and $250,000 (joint)
2026 tax bracket highlights (marginal rate thresholds from the source):
– Top rate 37%: over $640,600 (single), $768,700 (joint)
– 24% bracket: starts over $105,700 (single), $211,400 (joint)
For immigrant workers, bracket changes matter most when combined with shifts in family size, immigration status, and work authorization. A move from part-time to full-time or adding a second job can change withholding patterns even if financial circumstances still feel tight.
Payroll taxes and other workplace limits
Key payroll and workplace-related numbers for 2026:
- Social Security wage base: $184,500
- Maximum employee Social Security deduction: $11,439 (6.2%)
- Medicare: 1.45% (no wage cap)
- Additional Medicare: +0.9% over $200,000 (single) and $250,000 (joint)
- Dependent care FSA exclusion: $7,500
- HSA limits:
- Individual: $4,400
- Family: $8,750
Employer paperwork deadline:
– W-2s and 1099s due by February 2, 2026, because Jan. 31 falls on a Saturday.
Effect on immigrant workers and mixed-status households
Analysis from VisaVerge.com highlights that changes like the tips and overtime deductions can have an outsized effect on immigrants because many work in service, healthcare support, logistics, and other roles with variable pay.
Important constraints to note:
– IRS-designated occupations determine eligibility for the tips deduction.
– MAGI phase-outs limit benefits for higher earners.
– The overtime deduction’s SSN/joint-filing requirement may exclude mixed-status couples who file separately or lack SSNs.
As 2026 approaches, the immediate pressure point is withholding: the new rules are designed to change taxes owed, but the day-to-day impact will depend on whether workers and employers update their Form W-4 settings to match the new law.
For the 2026 tax year, the IRS implements inflation-linked adjustments and OBBBA provisions that create temporary tips and overtime deductions (2025–2028) up to $12,500 per filer with MAGI phase-outs and SSN/joint-filing eligibility rules. Workers must update 2026 Form W-4 using draft withholding tables and a new checkbox. Retirement contribution limits, standard deductions, a senior deduction, and payroll caps also rise, altering withholding, take-home pay, and retirement saving opportunities—especially for immigrant and mixed-status households.
