W-4 Adjustment Guide for Tipped Employees
The OBBBA lets you deduct up to $25,000 in tips from your federal taxes — but your employer doesn't know this until you update your W-4. Here's exactly how to do it.
The 3-Step Process
- 1. Calculate your deduction — Use our calculator to find your exact OBBBA deduction amount.
- 2. Update Line 4b — On a new W-4 form, enter your deduction amount on Line 4b (Deductions). This is NOT Line 4c (additional withholding) — Line 4b reduces withholding, Line 4c increases it.
- 3. Submit to payroll — Give the completed form to your HR or payroll department. Changes take effect on your next paycheck.
Line 4b vs. Line 4c — Important Difference
Line 4b — Deductions ✓
Enter your OBBBA deduction here. This tells your employer to withhold LESS — putting more money in your paycheck.
Line 4c — Extra Withholding ✗
Do NOT use this line. It adds extra withholding per paycheck — the opposite of what you want.