Question

What’s the difference between an allowance and a dependent exemption?

Answer

You report your personal allowances to your employer on Form W-4. Your employer will use the number of allowances you report to figure how much tax to withhold from your paycheck. The greater the number of allowances, the less tax your employer will withhold.

A dependent exemption is an amount you subtract from your Adjusted Gross Income (AGI) on your tax return to arrive at your taxable income. The number of exemptions you will take is one factor used in arriving at the number of allowances on your W-4

In short, an allowance is used by your employer to calculate how much to withhold from your paycheck, and a dependent exemption is used on your tax return to calculate your actual tax liability.

Related Topics

Related Resources

Is My Child’s Private Kindergarten Tuition Tax Deductible?

Wondering if the tuition you pay for private kindergarten is tax deductible? Let the tax experts at H&R Block help you determine what expenses you can deduct.

E-File Extension Rejected

Was your IRS extension request rejected? Find out what your next steps are when it comes to filing for an extension with the help of H&R Block

Reviewing Your Tax Return Filing Options

Review the best options for filing your tax return with H&R Block. Our tax experts will help you choose the method that is right for your situation.

Benefits of Filing Paper Tax Returns

Learn more about the benefits of paper taxes and get tax answers at H&R Block.