The 2017 Tax Cuts and Job Act led to changes to the W-4 that take effect in 2020. The changes eliminate allowances and shift toward dependents and deductions.
The draft W-4 almost doubles the standard deduction from $6,500 to $12,000 for individual filers and $13,000 to $24,000 for joint returns. It also increases the Child Tax Credit from $1,000 to $2,000 for children younger than 17 and $500 for other dependents.
Some itemized deductions that are still on the books include qualifying home mortgage interest, charitable contributions, state and local taxes (SALT), and medical expenses above 10 percent of one’s income.
Employees hired on or after Jan. 1, 2020, are required to complete the 2020 W-4. Employees hired before 2020 who don’t want to change their withholding don’t need to complete a new W-4; however, anyone who does wish to adjust their withholding after Jan. 1 must provide their employer with the new W-4.
The IRS is expected to have the finalized 2020 W-4 by the end of November.