How Many Exemptions Should I Claim Married Filing Jointly?

When considering your tax withholding, particularly if you are married and filing jointly, it is common to wonder about claiming “exemptions.” However, the concept of personal exemptions is no longer used for federal income tax withholding purposes. The updated system for determining how much tax is withheld from your paycheck focuses on a different set of factors to ensure accuracy.

Understanding Past Withholding Concepts

Historically, federal tax withholding relied on “personal exemptions” and “withholding allowances.” Before the Tax Cuts and Jobs Act (TCJA) of 2017, taxpayers could claim a specific dollar amount as a personal exemption for themselves, their spouse, and each dependent, which directly reduced their taxable income. These exemptions were linked to withholding allowances on the W-4 form, where each allowance reduced the amount of tax withheld from a paycheck. However, the TCJA, effective starting in 2018, eliminated personal and dependent exemptions, setting their value to zero. This change significantly altered how employers calculate federal income tax withholding, leading to a redesigned W-4 form.

The Current W-4 Form

The Internal Revenue Service (IRS) released a redesigned Form W-4, Employee’s Withholding Certificate, for 2020 onwards. This updated form aims to simplify the process and improve the accuracy of withholding by directly incorporating information relevant to your tax situation. It consists of five steps, with only Step 1 (personal information and filing status) and Step 5 (signature) being mandatory for all employees.

Step 1 requires you to provide basic details such as your name, Social Security number, address, and your filing status. Step 2 is applicable if you have more than one job or if you are married filing jointly and your spouse also works. Step 3 allows you to account for dependents, where you can claim a credit amount for qualifying children under age 17 and for other dependents. Finally, Step 4 provides sections for other adjustments, including other income not from jobs, itemized deductions beyond the standard deduction, and any additional tax you wish to have withheld each pay period.

Strategic Withholding for Married Filing Jointly

For married individuals filing jointly, accurately completing the W-4 form is important to avoid under- or over-withholding. When both spouses are employed, coordinating their W-4 forms is crucial because only one standard deduction can be claimed on a joint tax return, regardless of the number of jobs. This coordination prevents situations where too little tax is withheld from combined incomes, potentially leading to a tax bill or penalties at year-end.

The IRS offers several options within Step 2 of the W-4 to address multiple income sources for married filing jointly. The most accurate method is to use the IRS Tax Withholding Estimator. This online tool guides you through entering income details for both spouses and provides a recommended additional withholding amount to enter on line 4(c) of one spouse’s W-4.

Alternatively, you can complete the Multiple Jobs Worksheet provided with the W-4 instructions, entering the result on line 4(c) of the W-4 for the highest-paying job. For couples with only two jobs that have similar pay, checking the box in Step 2(c) on both W-4 forms is an option, as it splits the standard deduction and tax brackets for withholding purposes.

Accounting for dependent tax credits in Step 3 should generally be done on only one spouse’s W-4 to prevent over-withholding. Additional income or deductions in Step 4 should be consolidated on one W-4 or carefully allocated between both.