Updated October 18, 2026. Quick answer: Step 3 of Form W-4P lets you claim the child tax credit, the credit for other dependents, and other credits so the payer withholds less. You multiply the number of qualifying children and of other dependents by the amounts printed on the form, add other credits, and enter the total on line 3. Only one payer completes it.
What this part is for
Step 3 is where the Form W-4P certificate turns your household into a withholding adjustment. The instructions open with its purpose: “This step provides instructions for determining the amount of the child tax credit and the credit for other dependents that you may be able to claim when you file your tax return.” The form restricts it by income: “If your total income will be $200,000 or less ($400,000 or less if married filing jointly):” Whether you complete it at all depends on Form W-4P Step 2, and the identity lines are at Form W-4P Step 1. The caution further down says where Step 3 goes when you have a job, which is the Form W-4 for that job.
The lines, one by one
| Line | What the form says |
|---|---|
| Condition | “If your total income will be $200,000 or less ($400,000 or less if married filing jointly):” |
| 3(a) | “Multiply the number of qualifying children under age 17 by $2,200” |
| 3(b) | “Multiply the number of other dependents by $500” |
| 3(c) | “Add other credits, such as foreign tax credit and education tax credits. Enter the total here” |
| 3 | “Add the amounts from Steps 3(a), 3(b), and 3(c). Enter the total here” |
The instructions explain who counts. For the child tax credit: “To qualify for the child tax credit, the child must be under age 17 as of December 31, must be your dependent who generally lives with you for more than half the year, and must have the required social security number.” “You may be able to claim a credit for other dependents for whom a child tax credit can’t be claimed, such as an older child or a qualifying relative.” For the further requirements, the instructions say: “For additional eligibility requirements for these credits, see Pub. 501, Dependents, Standard Deduction, and Filing Information.”
Where the number comes from
The counts come from your household, and 3(c) comes from other credits you expect, which the instructions describe this way: “You can also include other tax credits for which you are eligible in this step, such as the foreign tax credit and the education tax credits.” The instructions repeat the Social Security number requirement: “must have the required social security number to claim certain credits and deductions.”
Where it goes next
Line 3 stays on the form for the payer. The effect is described in the instructions: “Including these credits will increase your payments and reduce the amount of any refund you may receive when you file your tax return.” Step 3 is limited to one payer. The caution says “If you (or if married filing jointly, you and/or your spouse) have a job(s), do NOT complete Steps 3 through 4(b) on Form W-4P.” “Leave those steps blank for the other pensions/annuities.” Step 4 follows at Form W-4P Step 4. To test a result, try the retirement withholding calculator. The tax withheld is claimed on Form 1040 line 25 of the Form 1040 line by line guide.
A worked example
Illustration, not an IRS example: suppose 2 qualifying children and 1 other dependent, no other credits, and income within the limit in the form’s line text. Each result below is an arithmetic sum of the amounts printed in the form’s line text.
| Item | Illustration |
|---|---|
| 3(a): 2 qualifying children x $2,200 | $4,400 (computed) |
| 3(b): 1 other dependent x $500 | $500 (computed) |
| 3(c): other credits (suppose none) | 0 |
| Line 3: 3(a) plus 3(b) plus 3(c) | $4,900 (computed) |
In this illustration line 3 is 4,400 plus 500, which is 4,900. The figures per child and per other dependent are from the form; the counts are invented.
Edition and line numbers
This page reads the 2026 version of Form W-4P, the current file irs.gov served on 2026-10-18. A payer may still be applying an earlier election; check the date and year printed on your own form. Use the line numbers and step letters printed on the copy you are holding, because a different edition can number or word them differently.
Common mistakes
- Using Step 3 on a pension that is not the highest-paying one. The caution says “Leave those steps blank for the other pensions/annuities.”
- Counting a child who is not under age 17 as a qualifying child. The instructions say the child “must be under age 17 as of December 31”, and that “a credit for other dependents for whom a child tax credit can’t be claimed” may apply instead.
- Entering this step when your income is above the printed limit. The form’s line text begins “If your total income will be $200,000 or less ($400,000 or less if married filing jointly):”
Related: Form W-4P, Form W-4, Form 1040 line 25, and retirement withholding calculator.
Sources
- Form W-4P (2026), Withholding Certificate for Periodic Pension or Annuity Payments: https://www.irs.gov/pub/irs-pdf/fw4p.pdf
- IRS: About Form W-4P: https://www.irs.gov/forms-pubs/about-form-w-4p
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.