How to Calculate W-4 Exemptions

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Use the W-4 worksheet to determine withholding exemptions.
Use the W-4 worksheet to determine withholding exemptions. (Image: Elena Elisseeva/iStock/Getty Images)

The Internal Revenue Service requires you to pay your taxes as you earn money. When you have a job, this means your employer deducts taxes from your paycheck. The number of W-4 exemptions, also called withholding allowances, affects how much gets taken out each payday. Get it right and you won’t owe the IRS a pile of money when you file your tax return. Use the Personal Allowances Worksheet that comes with the W-4 form to calculate exemptions. Keep this worksheet for your records.

Skip line A on the Personal Allowances Worksheet or enter zero if someone claims you as a dependent. Otherwise, enter “1.”

Put a “1” on line B when you have just one job and you are single. You can also claim one allowance if you are married, your spouse doesn’t work and you don’t have another job. If your spouse is employed or you work a second job, enter zero when the total wages from these extra jobs comes to $1,500 or more annually.

Leave line C blank if you are single. If you’re married, enter “1.” Line C is voluntary when your spouse works. You can put a zero here so more income tax will be withheld. This reduces any amount you might owe when you file your taxes.

Complete lines D and E. The total number of dependent children and adults you expect to claim on your tax return goes on line D. Skip line E unless you qualify to claim head of household. If you do qualify, write “1” here.

Claim one withholding allowance on line F if you are eligible for the Child and Dependent Care Tax Credit and you expect to pay $2,000 or more for someone to care for a dependent child or adult so that you and your spouse can go to work or attend school.

Calculate the number of withholding allowances you receive for the Child Tax Credit. Write the total on line G. To calculate the number of allowances, multiply the number of eligible children you have by two if your filing status is single and you make less than 65,000, or if you are married with a combined income under $100,000. Subtract one if you have two to four children, or subtract two when there are five or more kids. For example, if you have four children, you have 4 * 2 – 1 = 7, so claim seven allowances. When you are single and make $65,000 to $84,000 or you are married with income of $100,000 to $119,000, simply enter the number of eligible children.

Calculate total withholding allowance by adding lines A to G and write the result on line H. Enter the total from line H on line 5 of the W-4 form.

Tips & Warnings

  • Some people have incomes low enough that they don’t owe any taxes and may qualify for exemption from payroll tax withholding. If you qualify, you don’t need to figure W-4 exemptions. Just write “Exempt” on line 7 of the W-4. You qualify if you didn’t owe any federal income tax last year and it looks like you won’t owe any this year.
  • There’s an additional IRS test for dependents to qualify for exemption from tax withholding. Dependents can’t have more than $350 in unearned income and no more than $1,050 in total income.

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