How many exemptions should my wife and I claim?

Question

We are a family of 4, with another child arriving in September. So I guess a family of 5 come tax time. We both work and almost make the same amount...probably around $60-65,000 (combined) income. We file jointly. Currently, I am claiming 2 and my wife is claiming 1. Is that ok or should we do it differently? Basically, I'd like to maximize our take home income and still get a descent return at the end of the year. Thanks for the help!

Answer 1

You can use the IRS withholding calculator linked below and your last paystubs to figure out your options.

Answer 2

You should always minimize your return. Try to overpay as little as possible with your income tax deductions.

If you overpay and get a big return, you are giving a way an interest-free loan. Instead, have your deductions adjusted and put the money into a savings account. At the end of the year, you'll have more than you would have received from your tax return.

Answer 3

Well, what you're claiming is OK, but you could claim more, even 8 or 9 between you, and still not owe at the end of the year.

It depends though on what you mean by a decent return (refund) at the end of the year.  Anything you get extra now in your paychecks means you get that much less in your refund.  It's the same total money, all that changes depending on what you claim on your W-4's is when you get the money.  Each extra exemption you claim will get around $10 extra per pay, then your refund will be around $520 less.