William Perez of About Money lists an easy-to-use method of determining the number of withholding allowances a person should claim for taxes. The formula uses a ratio of the amount of deductions available to the personal exemption amount as a means of calculating the best number of allowances to take.
Continue ReadingTo begin to calculate the amount of total deductions, one should take the number of personal exemptions allowable and multiply them by the exemption amount. Next, one should add to the result the deduction amount he is taking, for example, the standard deduction amount. The standard deduction amount in 2014 for a single individual was $6,200, with a head-of-household deduction of $9,100. This yields the total deductions amount.
The next step is to divide the total deductions amount by a single personal exemption amount. For 2014 the personal exemption amount is $3950, with multiple exemptions available due to dependents. The result is the number of withholding allowances the individual should take. The person should round the withholding number down to the nearest whole number before taking that amount of deductions. By rounding downward, he may have more withheld than actually needed, but it prevents him from underpaying his taxes and having to make up the difference at tax time.
Learn more about Income Tax