Adjusting Your Tax Withholding

If getting big checks in the mail makes people happy, then our country should be laughing out loud this time of year. The IRS says the average tax refund in 2008 amounted to about $2,400. Which mean the average taxpayer is having $200 too much withheld from their average paycheck every month.

Why does it happen? Often because big deductions, like mortgage interest, aren’t figured into withholding allowances.

But there’s a simple solution. It’s perfectly legal to changing the number of allowances on your W-4 so you’ll have less withheld. You can get one from your employer, or download one from the IRS.

There’s also a worksheet that will help you figure it out, or even better: use the handy calculator on the IRS website. In less than a minute you can figure out exactly how many allowances you should claim to minimize your withholdings.

Suppose instead of sending $200 a month to Washington, you put it in a mutual fund every month, maybe a 401(k) at work. If you earn 12%, in 10 years you’ll have an extra $50,000. Now that’s painless saving!

Of course, the last thing you want to do is not have enough withheld… so be careful. And if you do adjust your withholding to get fatter paychecks, don’t forget to adjust your savings strategy, too. You’re working for that money, make sure it works for you.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Watch This: Organize Your Home With Dollar Tree Products
Watch This: Organize Your Home With Dollar Tree Products

Here’s how to organize every corner of your home using only items from a dollar store.

10 Things You Should Never Buy on Amazon
10 Things You Should Never Buy on Amazon

Just because you can purchase something on Amazon doesn’t mean that you should.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

8 Ways to Slash the Cost of Homeowners Insurance
8 Ways to Slash the Cost of Homeowners Insurance

Reviewing this critical insurance policy takes a little effort, but it pays off big.

10 Items Every First-Aid Kit Should Have
10 Items Every First-Aid Kit Should Have

Take control of your health and safety by customizing your own first-aid kit with these Amazon purchases.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

Do This in the Car If You Want to Avoid COVID-19
Do This in the Car If You Want to Avoid COVID-19

It takes just seconds to take this simple preventive measure.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.