If you’ve been feeling like things are a little too quiet lately in payroll and benefits, don’t worry—2026 is here, and OBBB may bring a few updates worth paying attention to. Think of this as the HR version of checking the weather before a company picnic. No need to panic—just good to know whether you should bring umbrellas for everyone.
Trump Accounts
Trump Accounts are a new tax-advantaged savings and investment account created under recent legislation. These are official under the law but still awaiting full Department of Treasury guidance and could eventually sit alongside other long-term savings tools.
Trump Accounts are designated for children under age 18 as of each tax year. They are long-term savings accounts that can’t be accessed by the child until adulthood. Individuals can start contributing to these accounts effective July 4th, 2026.
Employees will look to HR for help understanding how they fit into the bigger financial picture. (Add it to the list right between “open enrollment” and “why didn’t I get my W-2?”)
Trump-Era Tax Provisions
Wisconsin is a non-conforming state, meaning any changes to the federal tax code must also be separately passed at the state level; therefore, any federal deductions or exclusions implemented will not apply to Wisconsin unless the state explicitly adopts them.
At the federal level, current law permanently extends the seven-bracket structure – 10%, 12%, 22%, 24%, 32%, 35%, and 37% – for tax years after 2025, and permanently increases the standard deduction to $15,750 for Single and Married Filing Separately, $23,625 for Head of Household, and $31,500 for Married Filing Jointly.
In addition, the SALT cap is increased to $40,000 for tax years 2025–2029 (indexed), with a phaseout for higher-income taxpayers whose incomes exceed $500,000, reducing the benefit by 30% of the amount above that threshold.
Take-home pay might shift a little. And when take-home pay shifts, retirement contributions often shift too, because people tend to adjust savings when their paychecks change, even if it’s just by a few dollars.
Overtime and Tip Tax Considerations
There’s also talk about potential updates to how overtime and tip income are taxed, so here’s the quick refresher on how it works now:
- Overtime is currently taxed the same as regular wages—it just feels higher because it bumps employees into higher withholding for that pay period.
- Tips are considered taxable income as well, whether they’re cash or credit card tips, and employers are responsible for reporting them and withholding appropriately.
The new federal rules provide for no federal income tax on qualifying tips, up to $25,000 per taxpayer. This benefit phases out for individuals earning more than $150,000 and married couples filing jointly earning more than $300,000. The exclusion is reduced by $100 for every $1,000 of income above those thresholds.
Certain professions, including health, law, accounting, actuarial sciences, consulting, and financial services, are excluded from eligibility. The provision applies to all cash tips, including those paid by credit card or check.
Similarly, no federal income tax applies to qualifying overtime, up to $12,500 per taxpayer, with the same income phaseout structure and reduction formula. Only the overtime premium, the amount paid above an employee’s regular hourly rate, qualifies for the exemption. For example, an employee earning $20 per hour who works 50 hours in a week would have 10 hours of $10-per-hour overtime premium exempt from federal income tax. Importantly, neither the tip nor the overtime exemption applies to FICA taxes.
When the new rules roll out, they could change how employers calculate withholding for these categories or how employees report tips. Because many workers rely on variable income, even small adjustments may influence how much they see in each paycheck.
The good news? The IRS has already acknowledged that 2025 may be a transition year. They’ve built in a period of grace to help employers adjust to any new requirements without penalties while the industry catches up and systems get updated. Feels weird to thank the IRS but I think we are all thankful for this.
What This Means for 401ks
Because 401k contributions are tied to earnings, any adjustments to taxable income or pay structure may lead to changes in participation. Employers might see a little ebb and flow in how employees contribute, especially during the transition period.
A few pieces of this puzzle are still unknown, so staying tuned will help HR avoid any “surprise and delight” moments—minus the delight.
Knowns vs. Unknowns
Known:
- Several tax changes will take effect in 2025 and 2026.
- Trump Accounts will be effective July 4, 2026.
Unknown:
- How the specifics will be structured.
- Whether retirement rules will adjust.
- How new savings options might coordinate with employer plans.
What Employers Can Do Now
- Keep an eye on updates as they roll out.
- Think through how changes could impact payroll, benefits, and employee communication.
- Prepare for questions—lots of questions. But HR is basically fluent in “questions with no official guidance yet,” so you’re already ahead.
And of course, partnering with solid financial advisors—like the team at Operose—and workforce experts like QPS can make navigating these shifts much smoother. It’s easier to stay compliant when you’re not trying to decode every new rule alone.
Quick Wrap-Up
There’s plenty still in motion but paying attention now means fewer surprises later.
As these changes take shape, partnering with knowledgeable financial advisors—such as those at Operose Advisors—and experienced workforce support teams like QPS Employment Group – can make it far easier to navigate evolving requirements and keep compliance challenges in check.
About the author:
PJ Weyer, CFP, is a Director at Operose. He joined the firm in 2024, bringing with him 8 years of industry experience. PJ provides advice to clients with respect to the planning, execution and feedback of their investment programs. In addition, PJ assists clients with overall financial planning, investment policy development, asset class assessment, investment management and ongoing client support and service.
Prior to joining Operose, PJ was a Financial Advisor at Diversified Management, Inc., where he helped the firm’s clients meet their financial objectives through investment selection, cash flow management, financial plan development and tax planning. PJ was responsible for authoring the firm’s quarterly letters, which educated clients on prevailing market conditions and the impact those conditions had on their investment portfolios.
PJ holds a B.S. from the University of Wisconsin – Madison and is a Certified Financial Planner (CFP).
