2007-02-09 03:51:32 · 3 answers · asked by bronz1369 1 in Business & Finance ➔ Taxes ➔ United States
What I mean is, what's the percentage difference. If I claim 0, is it 10% more than if I claimed 1 or is it even more than that? Anyone have specifics?
2007-02-09 04:24:33 · update #1
It usually means the differance in the refund you will get at the end of the year. In other words, do you want to get a little more each week or a lump sum at the end of the year.
2007-02-09 03:59:15 · answer #1 · answered by JAY O 5 · 1⤊ 1⤋
The difference in the rate of tax withholding per withholding allowance claimed (the 0 or 1 you speak of) isn't a fixed percentage, but will vary depending on your annualized income.
Generally speaking, if you are single, have only one job, and have very little other income (bank interest, investment income...), using 2 allowances on your W4 will make your total federal taxes withheld during the year roughly equal to your actual liability (so you'd expect to owe very little additional/get a small refund). Under the same assumptions, using 0 or 1 withholding allowance will lead to more taxes being withheld during the year (lower paycheck), and an overpayment of taxes leading to a refund situation when filing.
Someone earning 40K in 2007 and no other income or special credits/deductions, would have a tax liability of $4,296, taking the standard deduction and personal exemption.
Tax withholding with 2 allowances takes out $4,209 over the year.
1 allowance: $5,027
0 allowance: $5,877
The latter two cases will lead to a refund situation when filing, while the former you'd owe $87.
In percentages, the federal income tax takes 10.7% of the 40K.
2, 1, and 0 withholdings will deduct 10.5%, 12.6%, and 14.7% of your paycheck.
Here's a good calculator where you can play with all the inputs.
http://www.paycheckcity.com/netpaycalc/netpaycalculator.asp
2007-02-09 06:38:20 · answer #2 · answered by mliu327 2 · 0⤊ 1⤋
You pay more taxes if you claim zero. If you are single with no kids you should at least claim your self, so you should claim one. It is like telling the IRS how many people you have to take care of. They more you claim the more people you have to take care of, so the less they take out in taxes. Really the only time you should claim 0 is if some one else can claim you on their taxes, because every person can only be claimed once.
Hope this helps some.
2007-02-09 04:13:03 · answer #3 · answered by Pehsha P 2 · 0⤊ 0⤋