Who Is Exempt From Federal Withholding?

If you are exempt from a federal withholding, you'll owe Uncle Sam nothing at tax time.

Federal withholding refers to the portion of your income that an employer sets aside and sends to the Internal Revenue Service to offset your tax liability at tax time. The amount withheld is determined by your selections on the W-4 form you're required to fill out when beginning a new job or your work situation. However, certain people are exempt from federal withholding as long as they can meet a uniform set of requirements.


Students who don't work and those who work just a couple of hours here and there are often, although not automatically, exempt from federal withholding. Those who are must renew their exemption claims each year no later than February 15. Otherwise, their employer is required to begin withholding federal tax at the rate of a single person with zero allowances. Also, if you earned more than $850 for the year, including $300 or more of unearned income, such as interest and stock dividends, and have a parent who claims you as a dependent, you cannot claim exemption.


Homemakers can sometimes qualify if they owed no federal taxes in the previous year, and all the federal tax withheld from them during that year was given back to them after they filed their returns. However, this requires that if their spouses work, they file separately. Additionally, they must not expect to owe any federal taxes for the current year.

Unemployed Individuals

People who are not working, owned no federal taxes in the previous year either because they were not working and not collecting unemployment or because they made less than $850, may also qualify. However, they must continue to be unemployed without receiving unemployment pay so that they can expect to owe Uncle Sam nothing for the current year.