FICA Limits increase for 2026
The FICA limit for 2026 has been increased from $176,100 to $184,500. The
FICA rates are unchanged from 2025.
The 401K deduction limits have been increased for 2026.
$24,500 for those under 50 years of age
$24,500 plus an additional $8,000 catch up contribution for those over 50
years of age (total limit $32,500).
The SECURE ACT 2.0 Limits Catch-Up Contributions for High-Wage Earners.
Effective January 1, 2026 participants who have earned in excess of
$150,000 in FICA wages the previous year must make all catch-up
contributions as Roth (after-tax) contributions. This means that if high-wage
earners wish to make catch up contributions they must do so on an after-tax
basis. This rule applies to both 401(k) and 403(b) plans.
Higher Catch-Up Contributions for Certain Individuals
Individuals 60 through 63 years old will be able to make catch-up
contributions up to $11,250 annually to their workplace plan (the 2025 limits
was also $11,250). The catch-up for other individuals over 50 years of age is
still limited to $8,000. The Secure Act 2.0 limits this provision only to
employees whose FICA wages were $150,000 or below in the previous tax
year as mentioned above.
Reporting Overtime on the Employee W2
Due to the recent tax legislation passed by congress and signed into law,
overtime wages paid are required to be included on the employee’s 2025 W2
form. The overtime wages are reported in Box 12 labeled as ‘TT’.
The deduction for overtime applies only to the ‘half’ of the ‘time-and-a-half’
paid over the regular employee pay rate. Additionally, overtime wages are
only applicable when the employee has worked over 40 hours per week. The
40 hours worked calculation excludes Holiday and PTO hours paid, which are
not considered hours worked based on FLSA guidelines.
Updates to the 2026 W-4 Form
The IRS has modified the 2026 W-4 form to reflect updates driven by the
One Big Beautiful Bill Act (OBBBA).
The following are the key updates to the form:
- In Step 3(a) the amount for the child tax credit is increased to $2,200 from $2,000 per qualifying child. The amount allowed for other dependents in Step 3(b) remains unchanged at $500.
- The deduction worksheet for Step 4(b) now has 15 lines and is on itsown page. Among the new lines are lines to account for “no tax on overtime”, “no tax on tips”, “new car loan interest” and “an additional standard deduction amount for seniors”.
- A checkbox was added after Step 4 for employees to claim they are exempt from withholding. On the previous versions of the form, employees claimed exemption by writing the work “Exempt” on the form. The form also highlights that employees claiming exemption will be required to submit a new form W-4 again for 2027.