Money Tips: How Many Deductions Should You Claim?

Let's Look at the Facts

$1$ or $0$ are personal deductions that refer only to you as an individual. If you claim $1$ deduction, the amount of your weekly paycheck will be greater, since less tax will be taken out. If you claim $0$ deductions, your weekly paycheck will be smaller, since more tax will be taken out.

Let's Discuss Why

Some people claim $1$ deduction because they prefer to get more money in each paycheck. Why might they prefer this?

If you claim $0$ deductions, more tax will be taken out of your paycheck each pay period and you might be entitled to a refund. When would you receive this refund?

$3$ On January $1,$ you declared $1$ deduction on your employment form. On July $1,$ you changed jobs. You will earn the same salary, but you changed your deduction claim to $0.$ Next April, at tax time, are you likely to owe money? Get a refund? Neither?

Many people claim deductions for their spouse, their children, and their home mortgage payments. Tax experts warn that declaring too many deductions may require a large payment plus penalties in April. How can this be avoided?

Declaring too few deductions may result in a large refund. While this sounds appealing, you could be losing money by doing this. How is this possible?