Do Your Exemptions on Your Tax Return Have to Match the Exemptions on Your W-4?

by Michael Keenan

Your W-4 helps your employer know how much income tax to withhold from each paycheck so that at the end of the year, the amount withheld is pretty close to what you owe. To make the withholding more accurate, you claim allowances on your W-4, which can be, but doesn't have to be, for people you claim an exemption for on your taxes. However, the two numbers don't have to match up.

Allowances vs. Exemptions

When you file your taxes, you get to claim an exemption for each person you claim as a dependent, including yourself if no one else is able to claim you. However, claiming dependents is the only way to claim additional exemptions on your tax return. When you file your W-4, you do get to claim an allowance for each person you claim as a dependent, but you can also claim allowances for other things, such as filing as head of household or claiming substantial deductions or credits.

Tax Exemption Effects

Each exemption reduces your taxable income for the year by a preset amount, which ultimately lowers your tax bill. For example, for the 2013 tax year, each exemption is worth $3,900 off your tax bill. So, if you fall in the 10 percent bracket, each exemption saves you $390. If you're in the 25 percent bracket, you save $975. However, if you're making lots of money, the value of each exemption starts to decline. For the 2013 tax year, you start losing part of each exemption when your income hits $250,000 for single filers or $300,000 for couples filing jointly.

W-4 Allowance Effects

The number of allowances you claim on your W-4 won't affect how much you owe -- unless you claim so many allowances that you have too little money withheld and owe interest and penalties as a result. According to, if you don't have enough withheld, interest starts compounding from the time you should have paid in the money. In addition, if you knowingly claim too many allowances, you could face civil fines and even criminal charges. Therefore, don't claim more allowances than you're entitled to on your W-4.

Allowance Claiming Flexibility

You can, however, claim fewer exemptions than you're theoretically entitled to on your W-4 to increase the amount of withholding. You might want to do this if you have other income that isn't subject to withholding, such as interest or capital gains, to make sure you have enough withheld. Alternatively, if you know you tend to be a spendthrift, you may want to claim fewer allowances as a way of forced savings. At the end of the year, you'll get back any excess withholding in the form of a tax refund.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."