The IRS has released a draft version of the 2027 Form W-4, Employee’s Withholding Certificate. Unlike the 2026 Form W-4, which introduced several updates tied to the One Big Beautiful Bill Act (OBBBA), the draft 2027 form does not appear to make major structural changes.
The draft is marked “DRAFT — DO NOT FILE,” so employers and employees should treat it as informational until the final version is released.
What is Form W-4?
Form W-4 is the federal withholding certificate employees complete so their employer can determine how much federal income tax to withhold from each paycheck. Employees generally should review or update their W-4 when personal or financial circumstances change, such as a new job, marriage, dependents, multiple jobs, changes in deductions or credits, or other income.
What’s changing in the draft 2027 W-4?
No major structural changes from 2026
The draft 2027 Form W-4 follows the same overall structure used for the 2026 form. It keeps the familiar sections for personal information, multiple jobs or spouse works, dependent and other credits, other adjustments, exempt from withholding, and employee signature.
It also retains the Multiple Jobs Worksheet and the expanded Step 4(b) Deductions Worksheet that was introduced for 2026.
For employers, this means the 2027 draft should not require the same level of system or process review that came with the 2026 redesign.
Placeholder values remain throughout the draft
The draft includes placeholder values for several 2027 amounts that have not yet been finalized by the IRS. For example, the child tax credit amount in Step 3 is shown as a placeholder, and the standard deduction amounts, itemized deduction limitation thresholds, and Multiple Jobs Worksheet values also remain blank or placeholder-based.
This is expected in an early draft. It gives employers, payroll providers, and tax professionals visibility into the form structure while allowing the IRS to finalize inflation-adjusted figures later.
SALT deduction amounts were updated
The most notable numeric update appears in the Step 4(b) Deductions Worksheet for state and local taxes (SALT).
For 2027, the draft allows employees to enter state and local taxes on the worksheet if total income is less than:
$510,050, or$255,025 if married filing separately.
The draft also lists state and local taxes paid up to:
$40,804, or $20,402 if married filing separately.
For comparison, the 2026 Form W-4 listed the income thresholds at $505,000 and $252,500 if married filing separately, with state and local taxes paid up to $40,400 and $20,200 if married filing separately.
OBBBA-related deduction lines remain in place
The draft 2027 Form W-4 keeps the expanded deduction lines that were added to the 2026 form following OBBBA. These include qualified tips, qualified overtime compensation, qualified passenger vehicle loan interest, and the senior deduction for taxpayers age 65 or older.
Employees may also continue to account for other deductions and adjustments, such as student loan interest, deductible IRA contributions, educator expenses, alimony paid, and certain other adjustments from Schedule 1.
Exempt from withholding remains a checkbox
The draft keeps the exemption checkbox that was added to the 2026 version. Employees who claim exemption from withholding must certify that they meet the applicable conditions. The draft 2027 form also states that employees claiming exemption for 2027 would need to submit a new Form W-4 by February 15, 2028, to continue claiming exempt status for the following year.
What employers should do now
Because this is only a draft, employers do not need to make immediate production changes. However, payroll and HR teams should review the draft and compare it against their 2026 W-4 setup.
Recommended next steps
Review the draft 2027 Form W-4 against current payroll and HRIS workflows.
Confirm that existing 2026 W-4 field mapping still supports the 2027 draft.
Monitor the final IRS release for updated dollar amounts and any late-stage changes.
Update employee-facing guidance once the final form is available.
Pay particular attention to the Step 4(b) Deductions Worksheet, especially if your systems or guidance reference SALT limits, standard deduction values, or other deduction thresholds.
What employees should know
Employees do not need to submit a new W-4 simply because a draft form has been released. However, they should review their withholding when their financial or personal situation changes.
Employees may want to revisit their W-4 if they have multiple jobs, a working spouse, dependents, significant deductions, tips, overtime, passenger vehicle loan interest, or senior-related deductions.
The IRS withholding estimator remains a helpful tool for checking whether current withholding is aligned with expected tax liability.
Key takeaway
The draft 2027 Form W-4 is best viewed as a continuation of the 2026 form, not a redesign. The structure remains largely unchanged, OBBBA-related deduction lines remain in place, and most 2027 dollar amounts are still placeholders.
For employers, the main action item is to monitor the final release and confirm that existing 2026 W-4 processes remain compatible. The one numeric area to watch now is the updated state and local tax deduction language in the Step 4(b) Deductions Worksheet.
Rudy Mahanta is a Certified Payroll Professional with a passion for helping organizations optimize their payroll tax processes while minimizing audit exposure and ensuring compliance with all federal, state, and local requirements.
He brings a wealth of experience to his role, having worked with major service bureaus like ADP, Ceridian, MasterTax, and UKG in the past. This knowledge helps clients as they can benefit from Mahanta’s deep understanding of the payroll tax industry to improve efficiency and compliance while minimizing costs.
Mahanta’s expertise lies in developing and implementing effective payroll strategies that deliver measurable results. He co-created a compliance dashboard that has helped Experian Employer Services clients maintain regulatory adherence with improved service.
