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What Are Allowances on a W-4?

Marriage and children - two great reasons to amend your W-4 allowances

The W-4 form determines how much tax is withheld from your wages based on how many allowances you claim

Form W-4 [Employee’s Withholding Allowance Certificate] determines how much federal, state, local, Social Security, and Medicare tax is withheld from your paychecks. You must fill out this form and give it to your employer when beginning a new job, even if you are exempt from withholding.

On the W-4 you can claim a certain number of allowances depending on your life situation. It’s these allowances that determine your withholding. If you claim 0 allowances, the maximum amount of taxes will be withheld. For every additional allowance you claim, a little less tax will be withheld from your paycheck.

There is a rough correlation between the number of allowances you can claim on your W-4 and the number of personal exemptions you can claim on your tax return. This should not be taken as exact, however, as there is more at play.

For example, if you are a college kid who has a job but is still claimed as a dependent on your parents’ return, then you would take 0 allowances because your personal exemption goes to your parents.

Things get a little more complicated if you are a single person working one job. In this situation, claiming two allowances will most likely get you the closest to your tax obligations, but when everything is said and done you may end up owing the IRS a modest sum. However, you can also choose to claim 1 allowance, which will mean that too much tax is withheld but it will guarantee you a refund at the end of the tax year.

The reason a single person would claim 2 allowances instead of just 1 (which is the number of personal exemptions you would claim on your tax return) is for people who work two jobs. If you work two jobs, you can claim 1 allowance at each job, or 2 allowances at one job and 0 at the other.

If you are married, you should generally claim 2 allowances. If you are married with a kid, you should generally claim 3 allowances, married with two kids 4 allowances, and so on.

You can claim additional allowances if you will file as head of household, if you had at least $1,900 of child or dependent care expenses for which you plan to claim a credit, or if you are eligible to claim the Child Tax Credit under certain circumstances.

Allowances can be difficult to determine. Everyone should complete the Personal Allowances Worksheet on the first page of the W-4. Those who plan to itemize deductions should complete the Deductions and Adjustments Worksheet on page 2 and those with two jobs or a spouse who works should complete the Two-Earners/Multiple Jobs Worksheet on page 2 also. Alternately you can use the IRS Withholding Calculator to help you determine your allowances.

After you fill out your W-4, don’t forget it. When you file your return, make sure your withholding more or less lines up with your tax obligations. You want to avoid either a big tax bill or a big tax refund.

Also remember to adjust your W-4 if there are major changes in your life. If you get married or divorced, or gain or lose a dependent, you will need to change the number of allowances you claim. Likewise, if you become or cease to be someone else’s dependent you will likely have to change your withholding.

Withholding is something everyone needs to pay attention to, whether you’re looking ahead to the upcoming tax season or filing back tax returns online.

Photo via roger4336 on Flickr.

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3 Responses to “What Are Allowances on a W-4?”

  1. Chris says:

    You said “generally” regarding married with one child claiming 3 and married with two children claiming 4. Can you give me some examples that would be exceptions to those rules? I’m married with one child and one on the way in February. Our joint incomes will be around $200k. Thanks!!!

  2. rachel norkett says:

    married but separated got 3 to claim on my taxes this year. 2700 a month. what can I expect to get back on my taxes?

    • admin says:

      Hi Rachel,

      Your refund amount depends on a number of different variables. I suggest creating an account and entering your information. Before having to pay anything, you will be able to see the estimated refund amount that you can expect to receive.

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