I want to lower the amount of taxes I pay in a year. Currently I claim 1 federal and IL allowances Additional amounts deducted for FED and State (ILLINOIS): $0.00.

I'm single and don't have any children

I rent

I don't pay local/city tax

I'm in the 25% marginal tax bracket

My state tax is 3.25%

Here is the break down of how much I'm paying, which I think is too high, and would rather have more money to invest into my Roth, save for emergency fund, etc.

Gross Earnings: $2,230.76

All insurance payments are taken out pre-tax bi-weekly. $133.45

Fed Taxable Gross: $2,101.28

Total taxes: $543.61

Total Deductions: $133.64

Total Deductions include the following:

 Before Tax Deductions:              After Tax: 
        401k    $66.92                  LTD $2.46
        Med     $45.77
        Dental  $6.66
        Vision  $5.83
        Life    $4.72
        Grp ADD $1.28

Reducing the amount refunded to me at the end of the year is my goal, which I want done by reducing the amount withheld from each check (ideally ~$0.00 as close as I can get). Is filing 0 really the solution to this? I'm not sure how to calculate my tax check afterwards.

Right now I'm paying 543.61*26 = $14,133.86 in taxes a year. Does paying this much/year in taxes seem steep?

Here's what I figure I'll owe.

$58,000-$6,300(Standard Deduction) = $51,700.

$51,700 - $37,650 (up to 15% marginal tax rate) = $14,050

$14,050 * .25 (Federal Marginal Tax Rate) = $3,512.50

$3,512.50 + $5,183.75 (amount owed from $0-$36,751) = $8,696.25

$58,000 * .0375 (IL Income tax = 3.75) = $2,175

$8,696.25 + $2,175 = $10,871.25 Taxes owed (Federal and State)

$14,133.86 (taxes paid) - $10,871.25 (taxes owed) = $3,262.61 Refund

FED withholding : $302.10 
FED MED/EE: $31.43 
FED OASDI/EE:$134.42 
IL Withholding: $75.66 

This is simplified and doesn't take into consideration that I will be paying student loan interest, which will increase my tax refund.

  • So what's exactly your question?
    – user19035
    Commented Feb 29, 2016 at 19:26
  • How to lower this tax bill to nil. Is filing 0 really the solution to this? Not sure how to calculate my tax amount while claiming 0.
    – DukeLuke
    Commented Feb 29, 2016 at 19:31
  • 2
    "my tax bill" could be 1) the amount withheld each paycheck; 2) the balance owed upon filing; 3) total paid in taxes for the year. Which?
    – DJohnM
    Commented Feb 29, 2016 at 20:22
  • 1
    If you are currently claiming 1 exemption on your W-4, and you go to 0 exemptions, you will have more tax withheld from your paychecks, and a higher refund (or lower tax due) at the end of the year. That sounds like the opposite of what you want to do. If this is your first year working, what makes you think that you will be getting a large refund at the end of the year?
    – Ben Miller
    Commented Feb 29, 2016 at 20:34
  • 1
    I edited the title to reflect what it seems you are actually asking. Commented Mar 1, 2016 at 3:47

4 Answers 4


Here is the way I would estimate your taxes. Remember that a bi-weekly paycheck means that you get 26 paychecks per year.

$58,000 gross
    FICA tax: $4312, or $165.85 per paycheck
- $3411 before tax deductions ($131.18 per paycheck)
$54,589 adjusted gross income
- $6300 standard deduction
- $4050 personal exemption
$44,239 taxable income

25% tax bracket: $5183.75 + 25% of the amount over $37,650
$6831 total federal tax

$7855 federal tax withheld ($302.10 per paycheck)
$1024 federal tax refund

$54,589 adjusted gross income
- $2150 Illinois personal exemption
$52,439 Illinois taxable income

3.75% Illinois flat tax
$1966 total Illinois tax

$1967 Illinois tax withheld ($75.66 per paycheck)
$1 Illinois tax refund  :)

If the $1000 federal refund is too much for you, you can decrease your withholding to bring your refund down. This can be done by increasing your exemptions claimed on your W-4. See "How can I adjust tax withholding so that I don't get a large Tax Refund?" for more details.

However, keep in mind that your state withholding is perfect right now, and if you increase your exemptions, you will likely owe tax to the state, unless you increase your state withholding at the same time.

  • What is the personal exemption?
    – DukeLuke
    Commented Feb 29, 2016 at 21:19
  • @DukeLuke The personal exemption in 2016 is $4050 per person in your household. Assuming that there isn't anyone else that will claim you as a dependent (parents, for example), you can take $4050 off of your taxable income.
    – Ben Miller
    Commented Feb 29, 2016 at 21:25
  • I filed my taxes for 2015, I was a student, and didn't get a personal exemption, although I did get 6300 for the standard deduction.
    – DukeLuke
    Commented Mar 1, 2016 at 2:36
  • @DukeLuke Did your parents claim you as a dependent this past year? If so, they got the personal exemption for you ($4000 in 2015).
    – Ben Miller
    Commented Mar 1, 2016 at 3:41
  • 1
    IL has a relatively simple income tax: 0.0375*AGI or $1659 in the above example.
    – Joe
    Commented Mar 1, 2016 at 4:13

So after a great deal of clarification, it appears that your question is how to adjust your withholding such that you'll have neither a refund, or a balance due, when you do your 2016 taxes next year.

First, a little terminology. The more you have withheld, the more money will be taken out of your check to cover your estimated tax liability. Confusingly, the more allowances you select on your W-4, the less money you will have withheld (more allowances means more dependents/deductions/other reasons why you will owe less tax). When you go to file your 2015 tax return next year, you'll figure out exactly how much you owe. If you had too little tax withheld, you'll have to pay the difference. If you had too much tax withheld, you'll get a refund back.

Given your situation, simply following the instructions on the W-4 should work pretty well. If you want to be more precise, you can use the IRS Withholding Calculator to figure the number of allowances and submit a new W-4 to your employer.

It's a little hard to tell whether "paying this much/year in taxes seem steep?" because you've lumped all the taxes together in one big bucket. Does the $543.61 in taxes per paycheck include Social Security (OASDI) and Medicare taxes?

Whatever you do, it's not going to be an exact science. Come tax time, you'll figure out exactly what you owe and either pay the balance or get a refund back. As long as you're relatively close, that's fine. You can always adjust your withholding again next year after you've done your taxes.

  • Total Taxes refers to all taxes withheld. Yes, great deal of clarification, I'm getting used to this website and sometimes it's hard to catch details that seem small to me, because I'm asking the question.
    – DukeLuke
    Commented Feb 29, 2016 at 20:51
  • @DukeLuke Ah. Since "Total Taxes" includes Social Security and Medicare, that messes up the calculations in your question. You should have around $4160 in Social Security and Medicare (combined) payments a year being withheld. It's probably better to focus specifically on one type of tax at a time (federal or state) rather than trying to combine them all, which will cause confusion. Commented Feb 29, 2016 at 21:01
  • 1
    Payroll taxes are much easier to bear if you remember that this money was never yours in the first place. It's really a tax upon your employer. It passes through your hands (on paper) only because that gives you the opportunity to reclaim some of it via social programs implemented as deductions.
    – keshlam
    Commented Feb 29, 2016 at 22:39
  • 1
    @keshlam No, that's not true at all. You lose a portion of your income through taxes, but that doesn't mean you didn't earn it, it means someone else (the government) takes it from you. If the government changes the rates you end up getting less or getting more, depending on whether the rate went down or up.
    – Andy
    Commented Feb 29, 2016 at 22:59
  • 1
    @keshlam Actually, I'd say the opposite. Instead of 7.65%, think of it as a 14.2% tax including both your portion and your employer's. When your employer hires you, it costs him that larger amount to hire you, and 14.2% of it goes to the government off the top.
    – Ben Miller
    Commented Feb 29, 2016 at 23:04

Look at how much tax you paid last year, including withholding and any additional amount that might have been due with the tax return. Look at the instructions for the W-4 form, which sets how much tax you want your employer to withhold. Adjust the numbers on that form until the total withheld during the year is close to what you expect this year's total to be -- remember, though, that there's no penalty for over-withholding but could be for under-withholding. Submit the W-4 form to your employer.

Remember that we're a few weeks into the year, so even if you adjust withholding now there will have been several paychecks at the prior setting; you can try to build that into your guesstimate of how to reset the withholding, or just not worry about it.

Do the same with your state's withholding adjustments form.

Repeat on a yearly basis, to account for raises, changes in other income, changes in filing status, etc. until it's close enough that you're satisfied with it. Then reconsider if/when your financial situation changes.

Personally I find that exercise more effort than it's worth, and have simply set my withholding at "close enough". I usually get some money back from the feds and owe some to the state, but either is handled happily by my normal bank account balance.

  • Was a student last year, so won't reflect changes in my income. Began my career the first working day of January.
    – DukeLuke
    Commented Feb 29, 2016 at 20:18

Welcome to the real world :-) There really aren't all that many ways for ordinary employees to lower taxes. You could put more in your 401k, buy a house (for the mortgage interest deduction, which lets you deduct some other things instead of taking standard deduction), or move to a different state to get rid of the state tax.

  • 2
    Earning less money is one more surefire way to reduce one's income tax. Commented Mar 1, 2016 at 2:42
  • @Chris W. Rea: Yeah, been there, done that. And of course now that I've typed up an answer, the OP goes and changes the question. Some days it just ain't worth getting out of bed :-)
    – jamesqf
    Commented Mar 1, 2016 at 4:59
  • How was the question changed? Your answer still seems relevant.
    – DukeLuke
    Commented Mar 1, 2016 at 14:15
  • 2
    @DukeLuke: Now instead of asking about reducing his taxes, he's asking about mimimizing his withholding, which is a different thing entirely. My experience, at least, is that for someone whose only income is from a single job, the W4 withholding amount is pretty close. Increasing it just leaves you with a big bill at tax time, and maybe penalties for under-withholding.
    – jamesqf
    Commented Mar 1, 2016 at 17:49

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