Differences between allowances, claiming 1 vs. 0?

Question

I am a 23 year old, saving money up living with my parents. My question is this, I make $82,000 anually. I currently claim 0 for allowances. I know claiming one would result in more money in my paychecks and claiming zero results in a higher return.

My question is this:

Am I losing any money by not claiming one? My tax return last year was around $1,500. Would that $1,500 just be spread out throughout the year or would I actually gain more than that in my checks?

Thanks so much for anyone's help.

Answer 1

Your total tax bill will not change, but you have made an interest-free loan of the refund amount to the Federal government.

Suggestion: Claim 1, invest the extra, preferably in a Roth retirement account. The Roth account is funded witrh taxed dollars and all of it, including all forms of appreciation are then non-taxable when you retire. In 40 years or so, you should have no problem becoming a millionaire.

Answer 2

You should continue to claim 0. By claiming 0, the Fed takes more money from your paycheck now, but it's better than coughing a big chunk for taxes later. The differences are when the money is taken out and by how much. The total amount shouldn't be a big difference.

Answer 3

Your actually final tax bill would not change.

If you changed from 1 to 0 and your paychecks went up by more than the $1500 annually, you would end up owing.

Ideally, we should all try to break even. I broke exactly even on the Federal return one year. This allows you to invest the money you would received as a refund throughout the year and you would come out ahead. If you are not a saver, this plan wouldn't work though. You have to be disciplined enough to invest the extra money you receive in your paychecks.

Answer 4

You'd break even overall - you either get the money in your paychecks, or get the extra in your refund. No difference in total, just when you get it. You are probably talking about around $850 either in your refund or spread out across the year.