Standard Deduction: What It Means for Employers

What it means in practice

IRS Topic No. 551 describes the standard deduction as "a specific dollar amount that reduces the amount of income on which you're taxed." It is the sum of the basic standard deduction and any additional amounts for age or blindness, and it varies by filing status, by whether the person is 65 or older or blind, and by whether another taxpayer can claim the person as a dependent. Publication 501 (2025) says most taxpayers can choose either the standard deduction or itemized deductions such as medical expenses, charitable contributions and taxes on Schedule A, and that a filer benefits from the standard deduction when it is more than their allowable itemized deductions. A filer who itemizes cannot also take the standard deduction (Topic 551).

The standard deduction is claimed on the employee's own return, not by the employer. It matters in payroll because the federal income tax withholding system is designed around it. IRS Notice 1392 says that "the benefits of the standard deduction are included in the existing wage withholding tables published in Pub. 15-T." The employee's Form W-4 tells the employer which filing status to use and whether to adjust for deductions above that amount.

2026 and 2025 amounts. Rev. Proc. 2025-32 sets the 2026 amounts at $32,200 for married individuals filing joint returns and surviving spouses, $24,150 for heads of household, and $16,100 for unmarried individuals and married individuals filing separate returns. The same revenue procedure explains that section 70102 of the One, Big, Beautiful Bill Act (Public Law 119-21) made the higher standard deduction from 2018 permanent and raised the 2025 base amounts to $15,750, $23,625 and $31,500, with inflation adjustments after 2025. It replaced the 2025 amounts published earlier in Rev. Proc. 2024-40. Publication 15-T (2026) says its withholding tables were updated for P.L. 119-21, including "the permanent extension of the increased standard deduction."

Additional amounts for age and blindness. For 2026, the additional standard deduction is $1,650 for each qualifying condition, or $2,050 for a person who is also unmarried and not a surviving spouse (Rev. Proc. 2025-32). For 2025, Topic 551 lists $1,600, or $2,000 for unmarried filers. A person is treated as 65 on the day before their 65th birthday, so Publication 505 (2026) uses "born before January 2, 1962" for 2026. Blindness is tested on the last day of the year; a person who is not totally blind needs a certified statement from an eye doctor that vision is no better than 20/200 in the better eye with glasses or contacts, or that the field of vision is 20 degrees or less (Pub 501). Publication 501 shows a 2025 joint return with both spouses over 65 getting $34,700: $31,500 plus two additional amounts of $1,600.

Dependents. For a person who can be claimed as a dependent on someone else's return, the 2026 standard deduction cannot exceed the greater of $1,350 or earned income plus $450 (Rev. Proc. 2025-32), and Publication 501 caps it at the regular amount for the filing status. Earned income here includes wages, salaries, tips and taxable scholarships. In a Publication 501 example, a 16-year-old with $150 of wages and $780 of interest gets $1,350, because $150 plus $450 is only $600.

Who cannot use the standard deduction. Publication 501 and Topic 551 say the standard deduction is zero for a married person filing separately whose spouse itemizes, for a return covering a short tax year because of a change in accounting period, and for a nonresident or dual-status alien. Topic 551 adds estates, trusts, common trust funds and partnerships. Exceptions exist for a nonresident alien married to a U.S. citizen or resident who elects with the spouse to be treated as a resident, and for certain students and business apprentices from India under the U.S.-India tax treaty.

How Form W-4 uses it. The 2026 Form W-4 says the filing status checked in Step 1(c) will "determine the standard deduction and tax rates used to compute your withholding." Publication 15-T says an employee who completes only Steps 1 and 5 is withheld on filing status, wages and payroll period alone, and a new employee who gives no Form W-4 is treated as single or married filing separately with no other entries. Step 4(b) is for an employee who expects to claim deductions "other than the basic standard deduction" and wants less withheld; the form lists itemized deductions and deductions for qualified tips, overtime compensation, passenger vehicle loan interest, student loan interest, IRAs and seniors. Publication 505 (2026) adds that Step 4(b) is also where an employee accounts for the additional standard deduction for age 65 and over. The Step 4(b) Deductions Worksheet enters the 2026 standard deduction on line 11 and counts itemized deductions only to the extent they exceed it, plus a new cash charitable gift amount of up to $1,000 ($2,000 married filing jointly) for people who take the standard deduction.

Step 2 and multiple jobs. The Form W-4 instructions say that if the Step 2(c) box is checked, "the standard deduction and tax brackets will be cut in half for each job." The form says this is accurate for jobs with similar pay. Steps 3 through 4(b) go on only one Form W-4, ideally for the highest paying job. Publication 15-T says the employer then uses the "Form W-4, Step 2, Checkbox" tables, which "results in higher withholding."

How Publication 15-T builds it in. For automated payroll, Worksheet 1A annualizes taxable wages (line 1c), adds any Step 4(a) other income, then subtracts the Step 4(b) amount plus, on line 1g, $12,900 for married filing jointly or $8,600 otherwise, or zero if the Step 2 box is checked. The result is the Adjusted Annual Wage Amount used in the Annual Percentage Method table. In the 2026 standard tables the 0% bracket runs to $7,500 for single, $19,300 for married filing jointly and $15,550 for head of household. Adding the line 1g amount gives $16,100, $32,200 and $24,150, the same as the 2026 standard deduction amounts. In the Step 2 checkbox tables, the 0% bracket ends at $8,050 for single and $16,100 for married filing jointly, half of each 2026 standard deduction, and no line 1g amount is subtracted. The manual wage bracket worksheet (Worksheet 2) has no line 1g; the employee's filing status and Step 2 choice select the column.

Forms W-4 from 2019 or earlier. A 2019 or earlier form stays in effect when the employee has not furnished a newer one (Pub 15-T). For those forms, Worksheet 1A subtracts $4,300 for each withholding allowance instead of the line 1g amount. Publication 15-T also offers an optional computational bridge: treat the employee as single or married filing jointly (never head of household), enter $8,600 or $12,900 in Step 4(a), enter allowances times $4,300 in Step 4(b), and carry over any extra withholding to Step 4(c). The bridge applies only to forms in effect on or before December 31, 2019, and stops when the employee furnishes a new form.

Nonresident alien employees. Because nonresident aliens generally cannot claim the standard deduction, Notice 1392 says employers are told to withhold an additional amount. Publication 15-T has employers add an amount to wages before applying the tables: for 2026, Table 2 (Forms W-4 from 2020 or later, or first paid in 2020 or later) adds $619.20 for a biweekly period and $16,100 a year, and Table 1 (pre-2020 forms) adds $453.80 biweekly. Students and business apprentices from India covered by Article 21(2) of the treaty are excluded from this procedure.

Worked example 1: single employee, no adjustments. Using Publication 15-T (2026) Worksheet 1A: a single employee paid $2,000 biweekly with no other Form W-4 entries. Line 1c is $2,000 x 26 = $52,000. Line 1g is $8,600, so the Adjusted Annual Wage Amount is $43,400. In the single standard table, $43,400 falls in the $19,900 to $57,900 row: $1,240 plus 12% of $23,500 ($2,820) = $4,060 a year, or $156.15 per biweekly period ($4,060 / 26). The biweekly wage bracket table shows $156 for adjusted wages of $1,985 to $2,005.

Worked example 2: same employee, Step 2 box checked. Line 1g is zero, so the adjusted amount stays $52,000. In the single Step 2 checkbox table, it falls in the $33,250 to $60,900 row: $2,900 plus 22% of $18,750 ($4,125) = $7,025, or $270.19 per period. The wage bracket table shows $269 for that wage range.

Worked example 3: Step 4(b) deduction. Same as example 1, but the employee enters $6,000 in Step 4(b), the Deductions Worksheet amount for one qualifying senior. Line 1h is $6,000 + $8,600 = $14,600, so the adjusted amount is $37,400. Tax is $1,240 plus 12% of $17,500 ($2,100) = $3,340, or $128.46 per period.

Worked example 4: a 2019 Form W-4. A single employee with one allowance on a 2019 form, paid $2,000 biweekly. Line 1k is $4,300, so the adjusted amount is $47,700 and tax is $1,240 plus 12% of $27,800 ($3,336) = $4,576, or $176.00 per period. Under the computational bridge the result is the same: $52,000 plus $8,600 in Step 4(a), minus $4,300 in Step 4(b) and $8,600 on line 1g, is again $47,700.

The new deductions from the 2025 law. IRS Fact Sheet FS-2025-03 describes deductions for 2025 through 2028 that are separate from the standard deduction and are available to both itemizing and non-itemizing taxpayers: up to $25,000 of qualified tips; up to $12,500 ($25,000 joint) of qualified overtime compensation, meaning the pay above the regular rate required by the Fair Labor Standards Act; up to $10,000 of qualified passenger vehicle loan interest; and a $6,000 deduction for each individual age 65 or older. The fact sheet says the senior deduction "is in addition to the current additional standard deduction for seniors," and it phases out above $75,000 of modified adjusted gross income ($150,000 joint). Publication 15-T (2026) says employers must use an employee's updated Form W-4 so the employee can account for the expected tips or overtime deduction in each paycheck, and that tips and overtime remain generally subject to Social Security and Medicare taxes.

What the standard deduction does not affect. Form W-4 and Publication 15-T cover federal income tax withholding only. The standard deduction does not reduce wages for FICA taxes, and Publication 15-T says its methods cannot be used where the 37% mandatory or 22% optional flat rate applies to supplemental wages. Line 1a of Worksheet 1A starts from taxable wages for the period, which can be lower than gross pay when a pre-tax deduction applies.

Where states differ. State income taxes follow their own rules. Two examples from official state pages: the California Franchise Tax Board says it has "a lower standard deduction than the IRS," listing 2025 amounts of $5,706 (single or married/RDP filing separately) and $11,412 (joint, head of household or qualifying surviving spouse), with a $1,300 minimum for dependents. California EDD's 2026 Method B withholding schedules subtract an annual standard deduction of $5,706 or $11,412 based on the DE 4, and say its Method A wage bracket tables already include it. By contrast, the Colorado Department of Revenue says Colorado income tax "is based generally on federal taxable income," so the federal deduction carries into the state calculation, but filers with adjusted gross income over $300,000 must add back the part of their federal standard or itemized deduction above $1,000 single or $2,000 joint for 2026 and later ($12,000 and $16,000 for 2023 to 2025). Check each state revenue department for its own rules.

Questions employers ask. Does the employer subtract the standard deduction from pay? No. It is not a payroll deduction and does not change net pay except through the withholding tables, which already account for it (Notice 1392). Should an employee enter the standard deduction in Step 4(b)? The form says Step 4(b) is for deductions other than the basic standard deduction. Can the employer pick the filing status? The employee selects it in Step 1(c); with no Form W-4, Publication 15-T treats a new employee as single or married filing separately. Do the 2026 tables use the 2025 law changes? Yes; Publication 15-T (2026) says they reflect P.L. 119-21.

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