Withholding must be updated and the changes start with tax year 2025
What the document says“shall modify the procedures prescribed under section 3402(a) of the Internal Revenue Code of 1986 for taxable years beginning after December 31, 2025, to take into account the deduction allowed under section 225”
The section requires the Secretary of the Treasury or a delegate to change the withholding procedures under section 3402(a) of the Internal Revenue Code of 1986 for taxable years beginning after December 31, 2025 to take the new deduction into account. The amendments apply to taxable years beginning after December 31, 2024, and for overtime reportable for periods before January 1, 2026 filers may approximate the separate accounting by any reasonable method the Secretary specifies.
What the document actually says“shall modify the procedures prescribed under section 3402(a) of the Internal Revenue Code of 1986 for taxable years beginning after December 31, 2025, to take into account the deduction allowed under section 225”
The Treasury must change how tax is held back from pay. That starts with tax years after December 31, 2025. It must allow for the new break.
The break itself starts a year sooner. For periods before 2026 an estimate may be used. The Secretary sets what counts as reasonable.
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