How many allowances should I claim for withholding at work on Form W-4?
Two entries are required on Form W-4 in addition to your name, address and social security number. The first is your filing status. The choices are “Married”, “Single” and “Married, but withhold at the single rate”. They should more properly be labeled “Married and my spouse does not work”, “Single” and “Married and my spouse works”, respectively. Select the appropriate filing status based on your marital status and whether your spouse works.
The second entry is the number of allowances you are claiming. To calculate the correct figure, add your total income for which there is no withholding (dividends, interest, pension and IRA distributions with no withholding, taxable social security, etc.) and subtract your allowable itemized deductions and personal exemptions. Your prior year return can be used as a guide with adjustments for changes to income or deductions. Divide the result by the current personal exemption. The result is the number of allowances you can claim to breakeven on your tax return. Married couples should aggregate their income and deductions for this purpose and can split the allowances any way they see fit.