withholding allowance

Definition

The amount of exemptions that an employee claims on his/her W-4 form. Employers use this information to determine how much money should be deducted from the individual's pay check for federal and state tax purposes. The more allowances that the individual claims on the form, the less money that will be deducted from each pay check. If an individual claims too many exemptions, he or she may have a tax liability due at the end of the year.

Use this term in a sentence

You should always get the correct withholding allowance to that there are never any issues around tax time at all.

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Upon the birth of my son I contacted my human resources department to submit a new W-4 increasing my withholding allowances.

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The withholding allowance was significant for the head of household with dependents who saw a decrease in his taxes paid after he made the change.

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