How to Calculate W4 Deductions

W4 exemptions determine how much you'll have deducted for taxes.

A W4 form is used by employers to determine how much money they should withhold for taxes from their employees' paychecks. When you fill out a W4 form, you have to determine how many exemptions you are eligible to claim, and how many you want to claim. "Exemptions" is the correct term, but many people refer to them as "deductions." The more exemptions that you claim, the less money will be withheld for taxes. However, if you do not have enough withheld, you may have to pay additional money at tax time.

Step 1

Determine whether anyone else can claim you as a dependent. If not, you can claim a W4 exemption.

Step 2

Determine whether you have less than $1,500 in income from other sources such as a second job or a spouse's income. If so, you can claim an additional W4 exemption.

Step 3

Claim an exemption for your spouse if you are married, or if you will file as a head of household.

Step 4

Determine the number of dependents, not including yourself and your spouse, that you will claim on your tax return. For example, if you have three kids, you will likely claim three additional dependents, so you are eligible to claim three exemptions.

Step 5

Claim an exemption if you have at least $1,900 of childcare expenses (not child support payments) that you will claim on your tax return.

Step 6

Calculate the number of exemptions you can claim for the child tax credit. If your income is below the annual limits--for 2012, it is $61,000 for unmarried individuals and $90,000 for married couples filing jointly--you can claim two exemptions for each child up to three. For the fourth child and beyond, you may only claim one exemption per child. If your income falls within the reduced exemption income range--for 2012, it is between $61,000 and $84,000 for unmarried individuals and between $90,000 and $119,000 for married couples filing jointly--you can claim one exemption for each child up to the seventh.

Step 7

Add together the exemptions you are eligible to take from Steps 1 through 6. This is the maximum number of exemptions you can take. However, if you would prefer to have more withheld so you will get a tax refund at the end of the year, claim fewer exemptions than you are entitled to on line 5 of the W4 form.

Tip

If your personal status changes to affect your tax status, you can file a new W4 form with your employer at any time to reflect such changes.

references & resources