How do I figure out

[MonkeyMama]

An exemption was $3400 in 2006 I believe - not sure 2007 (wouldn't be much more - goes up $50-$100 every year) - haven't gotten that far yet. But a basic rule of thumb which I explained in depth here recently was multiply your tax rate by 3400 x # of exemptions and that should so how much it is decreasing your refund.

I think it is pretty safe to assume you are in a 25% bracket (probably less - but going conservative). If you had a $6k refund, then:

$3400 x 7 exemptions x 25% = $5,950. If you claimed 7 you could keep another $5,950 every year.

It depends though how much of your refund was state and fed. Just do this calculation for the fed part. And round down a bit so you don't get under-withheld. I'd maybe go for 5 exemptions and give it a try - assuming the $6k was all fed refund.

I am doubtful your payroll Dept. will have a clue, but doesn't hurt to ask, you might luck out...

[Ima saver]

If there are 4 people in the family, only one of which works, why don't you claim 4 exemptions? (We have been self employed for 30 years)

[jIM_Ohio]

the allowances you claim (they are not exemptions, they are "allowances"... even though I cannot fully understand the difference) do not take into account other itemized deductions.

Mortgage interest
income from a second job (spouse)
income from a 3rd job (I run a soccer business which gives me some write offs)
unreimbursed business expenses
capital gains/ investment income

some of these change refund to be positive, some negative, but this allows for best use of money without giving government a free loan.

[Aleta]

The exemption for 2006 is $3,300. each. It is $3,400. for 2007

[Ima saver]

Thank you Jim for explaining that. Back when I took an exemption, I did not have any of those other things.

[MonkeyMama]

Originally Posted by jIM_Ohio

the allowances you claim (they are not exemptions, they are "allowances"... even though I cannot fully understand the difference) do not take into account other itemized deductions.

Mortgage interest
income from a second job (spouse)
income from a 3rd job (I run a soccer business which gives me some write offs)
unreimbursed business expenses
capital gains/ investment income

some of these change refund to be positive, some negative, but this allows for best use of money without giving government a free loan.

child tax credit is pretty big too. Yes indeed though.

All these are deductions and credits that you can take against your income. You have to convert them to "exemptions" basically to fill out the W-4. Deductions and credits are never referred to as exemptions otherwise. Actually, as Jim said, "allowance" is the term. But it gets converted into exemptions in a way. Just one more way to confuse the hell out of you. In general yes you get an exemption for every family member, and then you add all the other stuff too if you have it.

Is $3400 2007? I am not the one to ask - I am so entrenched in 2006 taxes I mostly have 2006 #s in my head. Who knew I had a 2007 # in there - probably from planning exemptions for 2007.

[Aleta]

Yes, the $3400 is for 2007.

[Homebody]

If you have refunds to declare, the appropriate agency will send a form to you, anyway here in California. I had to declare my California refund from 2005 for 2006 as income.