How new tax laws can help you keep more money in your paycheck this year

Some workers may want to adjust the amount they withhold for taxes from their last few paychecks for the year, because the new laws will change the amount many will owe for 2025.

The “big, beautiful bill” introduced new tax breaks and updated other tax breaks to be more generous, resulting in lower 2025 tax bills or higher refunds for some taxpayers.

When you reduce the amount of taxes withheld on your paycheck, it means you pay less in taxes throughout the year — resulting in a higher tax bill or lower refund come filing season. With the changes to OBBB tax laws, many taxpayers will pay less in taxes when they file next year.

Anyone who would rather pay less in taxes throughout the year, rather than get a larger refund, may want to adjust their payroll deductions now, Nancy Vanden Houten, chief U.S. economist at Oxford Economics, wrote in a report.

However, the IRS has not updated its 2025 withholding tables to reflect the tax changes made by OBBB in July, which apply retroactively to the beginning of this year. This makes it difficult for taxpayers to determine exactly how much they should withhold.

Should I change my deductions?

The IRS generally recommends that those who qualify for income tax credits and deductions reduce their withholdings.

Since OBBB is expected to lower the tax bill for many, you may want to reduce the amount of taxes withheld from your paycheck and keep more of your paycheck until the end of the year. If you expect to benefit from any of these new or expanded OBBB tax changes, you should consider lowering your withholding:

• Increase the standard deduction, which is the fixed amount that taxpayers can deduct from their taxable income if they do not itemize their taxes.
• Increases the maximum child tax credit by $200 to a total of $2,200 per qualifying child.
• For high-income taxpayers, or those who live in high-tax states, the state and local tax deduction also increased for 2025. The SALT deduction allows taxpayers to subtract some or all of the state and local taxes they pay from their federal taxable income.
• Three new “no tax” laws have also been implemented that will allow some taxpayers to increase the amount they can deduct from their taxes. These include “no tax on tips,” “no tax on overtime,” and “no tax on car loan interest.”
• Older Americans will also be able to deduct an additional $6,000 on their 2025 taxes.

How can I update my tax withholding?

The easiest tool to estimate how much you should withhold from each paycheck, the Withholding Estimator, has not yet been updated to account for all OBBB tax changes. However, if you only expect to take advantage of the increased standard deduction and OBBB child tax credit, the IRS estimator takes these changes into account.

For those who expect to receive lower taxes due to other new tax breaks, the IRS recommends that taxpayers consult a tax professional or manually complete a “Deductions Worksheet.”

Taxpayers can complete the deduction worksheet using their estimated income and deductions for 2025. The result will be on line 10 of the form, which you can then enter in Step 4(b) of your W-4 form. You can often update your withholdings digitally with your employer, or you can submit a new W-4 to the company to update your employer on how much federal tax to withhold from your paycheck.