What Will Changing My Federal Withholding Do to My Paycheck?

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If federal income tax withholding was as easy to predict as Medicare and Social Security withholding, you would have no problem figuring its effect on your paycheck. Unlike the latter two, which are based on flat percentages of your wages, federal income tax is based on the information you put on your W-4 form. If you change your W-4 conditions, it may increase or decrease your withholding.

Before calculating your withholding change, you'll need your filing status and number of allowances from lines 3 and 5 of your W-4. An easy way to understand allowances is to remember they reduce taxable income -- the more allowances you claim, the less your withholding. On the flip side, the fewer allowances you claim, the higher your withholding.

Calculation of Withholding Taxes

Let's say you change your allowances from zero to one and claim married filing status on your W-4. You also earn \$2,000 every two weeks. As of 2018, for a biweekly payroll, the Internal Revenue Service gives \$152.00 per allowance, according to IRS Circular E. Subtract this amount from \$2,000 to get \$1,848.00. You are taxed between 10 and 35 percent of your wages that go over a certain amount, based on your income. In most cases, you must also pay a flat amount. In your case, your wages over \$1,177 would face a 12 percent tax plus a flat amount of \$73.30.

Your calculation would go like this: \$1,848.00 - \$1,177.00 = \$671.00 x 12 percent = \$80.52 + \$73.30 = \$153.82 for your federal income tax each paycheck. If you had changed from one allowance to two, you would multiply the amount per biweekly allowance, \$152.00 by two to get \$304.00. Then you would subtract \$304.00 from \$2,000 to get \$1,696.00, which means less taxes and more take-home pay.

Allowance Per Pay Periods

As of 2018, you get \$79.80 per allowance for a weekly payroll, according to the IRS. You get \$172.90 for a semi-monthly payroll and \$345.80 for a monthly one. Multiply your total allowances by the value to get the amount that's excluded from your tax calculation.