How Much Income Tax Should Be Withheld?

Withholding the right amount of taxes makes a difference on your income tax return.

Getting Large Refunds

Having too much money withheld for income taxes can mean a large refund when filing tax returns each year. Base your withholding amount on information from your tax bracket, as well as the number of dependents you can claim. The IRS website includes a calculator that will tell you what tax bracket you are in.

More Monthly Income

Withholding the correct amount of taxes (about 20 percent for most Americans) will mean being able to balance your account with the Internal Revenue Service each year. This means you will be more able to do what you choose with your money on a monthly basis, as opposed to waiting for a big chunk in your tax refund.

Bottom Line

When completing a W-4 form for an employer, use the tax calculator that the IRS provides or closely follow the instructions that accompany the W-4 form. Doing so will help ensure that the correct amount is deducted each month and can make income tax return filing easier.

References

• IRS.gov: Withholding Calculator
• CNN Money: Taxes
• IRS.gov: Tax Withholding