Tax Overhaul’s New Withholding Calculations for Paychecks Are Released

Government estimates that more than 90% of workers will have bigger take-home pay under the withholding change

Congress passed a $1.5 trillion tax cut in December and most of the cuts technically took effect in January. PHOTO: MICHAEL NAGLE/BLOOMBERG NEWS

By  Richard Rubin

WASHINGTON—The Treasury Department on Thursday updated its rules for tax withholding from paychecks, changing calculations so most workers will start getting more take-home pay in February as a result of the recently passed tax law.

The government estimates that more than 90% of workers will have bigger paychecks under the withholding changes, and it says employers should implement the changes by Feb. 15.

Acting IRS Commisioner David Kautter said the IRS will be providing more information to help people understand and review the changes in the coming weeks.

Congress passed the $1.5 trillion tax cut in December and most of the cuts technically took effect in January. Taxpayers won’t file returns reflecting the new law until early 2019, but the changes in paycheck withholding will deliver some of those benefits now. About 80% of households will see their taxes drop, while 5% will pay more, according to a Tax Policy Center estimate. Those tax cuts fade over time and most changes to individual taxation are set to expire after 2025.

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