What Are Withholding Allowances?
The more withholding allowances you can claim, the less you will have to pay in federal income tax each pay period. This is why submitting your W-4 is so important. Until you turn this form in, your employer has to assume that you're claiming zero withholding allowances. With zero allowances, you're likely to be paying more tax than is necessary. The conditions for claiming withholding allowances are listed below.
- You can claim one allowance for yourself, unless someone else (a spouse or parent) will list you as a "dependent" on his or her income tax return.
- You can claim an allowance for your spouse, unless he or she is working and has already claimed an allowance for himself or herself at work.
- You can claim one allowance for each child you list as a dependent on your tax return, unless your spouse has already claimed the child on his or her W-4 form.
What this boils down to is that each individual in the family can be claimed only one time by one person to gain a withholding allowance. Here are some other allowances you might claim:
- You can claim an allowance if you're single and have only one job.
- You can claim an allowance if you're married, have only one job, and your spouse doesn't work, or wages from a second job or spouse's job are $1,000 or less.
- If you're filing as "head of household," you can claim an allowance. To be a "head of household," you have to be single and must be paying more than half the cost of maintaining a home for yourself and your dependent(s).
- You can claim an allowance if you spend at least $1,500 per year in out-of-pocket child care expenses, as long as you intend to claim a credit for this on your income tax return.
- You can claim allowances for the Child Care Credit. In 2007, the following conditions apply:
- If you're single and your income is less than $57,000, or if you're married and your income is less than $85,000, then you can claim two (2) additional allowances for each eligible child.
- If you're single and your total income will be between $57,000 and $84,000, or if you're married and your total income will be between $85,000 and $119,000, then you can claim one (1) additional allowance for each eligible child plus one (1) additional allowance if you have 4 or more eligible children.
- You can use the W-4 worksheet to calculate additional allowances. These allowances are based on deductions for interest on your home mortgage, contributions you made to charities, state and local taxes, some medical expenses, and various other deductions you might have taken. See the W-4 form for details.
To figure out your total allowances, use the worksheet on Form W-4. The information indicated above is repeated there. Don't ask your employer how many allowances you should claim. If you need help, get a copy of IRS Publication 919, How Do I Adjust My Tax Withholding? from your employer, call the IRS at 1-800-TAX-FORM (829-3676) for one, or download one from the IRS web site .