How to Calculate Deductions & Adjustments in a W-4 Worksheet

For most people, the Personal Allowances Worksheet on Internal Revenue Service Form W-4 works well to calculate the number of personal allowances that will allow your employer to accurately withhold money from your paycheck for income taxes. However, if you plan to claim large itemized deductions or adjustments to income, you may be entitled to more personal allowances if you figure your allowances using the Deductions and Adjustments Worksheet, also found on Form W-4. This worksheet takes into account the value of the deductions you claim so that your withholding will be more accurate.

Step 1

Add all of the itemized deductions you plan to claim for the year. For example, if you anticipate a $12,000 mortgage interest deduction, $4,000 state income tax deduction and a $5,000 charitable donations deduction, your total deductions are $21,000.

Step 2

Subtract your standard deduction from the total of your itemized deductions. The standard deductions are listed on the Deductions and Adjustments Worksheet. For example, if you are married filing jointly in 2011, your standard deduction equals $11,600, so subtract $11,600 from $21,000 to get $9,400.

Step 3

Add the result to your planned adjustments to income, if any. For this example, if you plan to also claim a $4,000 tuition and fees deduction, add $4,000 to $9,400 to get $13,400.

Step 4

Subtract any non-wage income, such as dividends or interest, that is not subject to withholding. Continuing the example, if you anticipate having $1,400 in interest, subtract $1,400 from $13,400 to get $12,000.

Step 5

Divide the result by the value of a personal deduction and drop any decimals to find your personal allowances. At the time of publication, a personal deduction equals $3,700. In this example, divide $12,000 by $3,700 to obtain 3.243, and drop the decimal to get three personal allowances.

references & resources