How to Determine Deductions on a W-4

by James Rada, Jr. ; Updated July 27, 2017

You have some control over how much the government will take from your paycheck in payroll taxes. The more deductions you have on your W-4 form, the less money will be taken in income tax withholding. While you can lower how much is taken from paycheck, if you have too little taken from your pay, you can easily wind up owing taxes at the end of the year. You should file a new W-4 with your employer whenever you have a change in your financial or personal situation.

Step 1

Take your personal deductions. You can take a deduction each for yourself and your spouse, plus a deduction for each dependent in your household. Dependents are anyone who you are the primary caregiver for.

Step 2

Take the work deduction. If you are single and have one job, married and have one job with a spouse who doesn’t work, married working two jobs with less than $1,500 annual income from the second job or married working one job with a spouse who earns less than $1,500 a year, then you can take one additional deduction.

Step 3

Take a deduction if you will file as a head of household on your income taxes. The guidelines for taking this deduction is that your are unmarried and pay more than half of the cost and upkeep of a home for you and your dependents.

Step 4

Take a deduction for child care expenses. If you child or dependent care expenses will total more than $1,800 for the year and you plan to take a tax credit for a portion of your expenses, then this lowers your taxes owed. This means that less money should be withheld from your pay for taxes.

Step 5

Take deductions if you will claim the child tax credit. How many deductions you take here depends on your total income. If as of 2010 your total income is less than $61,000 ($90,000 if married) take two deductions for each child. However, if you have three more eligible children, subtract one deduction from the total. If your total income will be between $61,000 and $84,000, take one deduction for each child. However, if you have six or more eligible children, add one more deduction.

Step 6

Take any additional deductions you may want or need. The IRS provides worksheets on the W-4 form to help you determine whether it would be advisable to take additional deductions if you itemize deductions on your tax forms. In general, if you have a lot of itemized deductions that lower your taxable income, you may want to take an additional W-4 deduction.

Step 7

Total all of the deductions you have calculated and enter them on the W-4 form on line 5. Whoever does your company's payroll will use your listed number of deductions to determine the amount of your salary that will be withheld for income taxes.

References

About the Author

James Rada, Jr. was a newspaper reporter for eight years and earned 23 awards from the Maryland Delaware D.C. Press Association, Associated Press, Society of Professional Journalists, Maryland State Teachers’ Association and CNHI. He also worked for 12 years as a marketing communications writer, earning a Print Copywriter of the Year Award from the Utah Ad Federation. He holds a Bachelor of Arts in communications.

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