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19 thoughts on “Exemptions, Allowances and Deductions: How to reduce your federal tax refund

  1. That calculator is very helpful – thank you! It was much easier to use than the IRS’s version, and the resulting computations were almost spot-on. To increase the accuracy of the results, I put my state tax withholdings into the after tax deduction column.

  2. My wife and I both work and we got a large refund for 2013. ($2700).
    Does your calculator for 2008 work for 2014 tax purposes?

    Thank you and I’ve been following Dave Ramsey for years.

  3. I also recently got married and my wife is going to start a new job soon. So using “1” allowance on each of our W4s suffice? Eventually I want to try and come out even (no returns and no tax liability), but I figured starting with an allowance of 1 would help me land on safe side.
    When we file for returns, I was planning to fill in “2” for exemptions. I also was planning to file Married jointly, would she have to fill out a separate 1040 and fill out exemptions also?

    Any suggestions as to if I am headed in the right direction? Much appreciate the help.

    P.S. The calculator was spot on! Thank you!

    • If you are married filing jointly, you only fill out one tax return. All your income is combined on one return including your deductions (remember, exemptions is only a term on your W-4).

      As far as using 1 for your exemptions, I would probably use at least 2 to start out. 1 will very likely result in a refund (depending on your other deductions like a mortgage or charitable giving). Your wife can start with 1, though.

      It’s quite hard to predict things the beginning of a job. The key for you guys is after you file your taxes next year, if you get a refund, divide it by 12 and run the calculator and see how you need to adjust things.

      • Thank you Mike. That certainly helps. That brings up another question regarding tax bracket.
        I started my current job in April and my wife will start her new job Nov 1st. So for 2014 tax purposes, are we taxed on the total pre-tax income amount or the YTD that we get our checks for? I realize it’s a stupid question but I just wanted to clarify. Because we are already taxed on the income, so taxing twice doesn’t make any sense.

        • Your tax is computed based on your total income before any taxes are taken out. And then you will be credited based on the taxes that were taken out of your paycheck. So you aren’t taxed twice. Hope that helps.

  4. I feel dumb asking this. I live in CA. I am claiming 3 allowances because when I file my taxes I claim myself, my daughter and head of household. I had NO idea I could claim more to have more money in my paychecks and less back in my refund. My question is this. If I claim more like maybe 5 or 6 to get my paychecks larger on my W-4 do I claim the same allowances on my tax return? I usually get a large refund and I don’t care if I get one now, I want want larger paychecks. My next question is how many is too many? I don’t want to owe at the end of the year. THANKS!

    • Changing your W-4 has no effect on what you do on your taxes. What you really want to do here is take your refund, divide it by your number of paychecks and then increase your allowances one at a time using my calculator ( until you are increasing your paycheck by a little less than that amount. That should allow you to take more home by simply decreasing your refund.

      • I recently received a 10% pay increase. so how would I figure it out then as I can’t use the refund amount from last year 🙁

        • I would still use the refund from last year. It won’t be perfect, but as long as you stay on the conservative side, you should be fine.

  5. So if I am paid biweekly and I’m changing my exemptions now to take effect on my April 15 paycheck it would be 20 more paychecks this year correct? And if I take my refund /20 I get 81.75. Do I deduct that amount from what’s already being taken out of my check for federal or do I keep adding allowances to get that federal withholding down to the 81.75? Sorry tax stuff is so confusing to me. Thank you

  6. Hello,
    I just bought a house and want to take advantage of property tax and interest to get this back monthly.
    If my monthly tax+interest lets say $1700 and I am in 28% tax bracket, should I just take $1700*12 and take 28% of it and divide that by how many paychecks and change my W4 witholdings to get that number increase in my paycheck?

  7. Me and my wife we both work,no kids and from past 2yrs we are ending up paying taxes out of pocket and every year we modify our W4’s but no luck still we pay out of pocket every year just amount changes every and no idea where we are going wrong.
    1st year 5k
    2nd year 10k
    3rd year 4k

    • How low did you make your exemptions on your w4? Worst case, you can specify on your W4 to have extra money taken out of your paycheck to avoid paying.