I am about to purchase a house and our realtor told us that most people change their w4 so that they get a bigger paycheck and no tax rfund. My question is complicated (or at least to me). What can we claim so that we can have less taxes taken from us/bigger paycheck and no or little refund, but without owing the IRS? Our house hold is currently my husband being the sole provider , myself (wife) being a stay at home mom, and 2 kids.

2 Answers 2


First, the single worst reason to do anything is because most people are doing it. The second worst thing is to take tax advice from a non-tax pro. (Ironic, I understand, but read on)

Run through your 2015 tax return. Do you itemize already? If not, there's a reason, the standard deduction for a couple is $12,600 in 2016, so a renter isn't likely to have enough deductions to itemize, even with a high state tax.

For 2016, project your total interest from the mortgage, and the year's property tax, then add your state income tax, and last, any charitable donations. This total comprises the bulk of what people take on their Schedule A. Now, since your current withholding assumes the standard $12,600, subtract this number, and you're left with the amount your taxable income will be reduced for the fact that you have the house. Last, divide this number by $4000. The result is how many more withholding allowances you can claim. One personal exemption (a withholding allowance) is exactly $4050 this year.

For what its worth, median home price for early 2016 was $190K. After 20% down, a $152K mortgage would cost about $6000 in interest the first year, and maybe $3000 in property tax. The average couple, making $60,000 or so won't have a state bill much over $3000, so shy of some nice donations, it's easy to have a house, yet still not itemize.

Of course, if you have higher income and a more expensive home, the numbers will be different.

The best you can do is to get tax software or use an online service and estimate the 2016 return based on your numbers. If you wish to post numbers via an edit to your question, I'm happy to update my answer a bit to your situation.

Note - the form you'll use to adjust withholdings, the W4, offers a worksheet to perform the calculation.

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It asks in line 1 for your total itemized deductions, then subtract the standard deduction, then divide by $4050. Pretty much what I suggested above.

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    Reminds me of the guy in the HR office many years ago. He was screaming that they had done his withholding wrong and were causing IRS problems and had better fix it now! The problem is he had raised it from married/1 to married/3 when he bought a house and now found he shouldn't have. Of course this was a paycheck-to-paycheck type person, he didn't have the money to pay the tax bill. Mar 6, 2016 at 23:38
  • Odds are, pre-mortgage, he didn't itemize, and the house was barely enough to put him over, let alone produce $8000 in deductions beyond the 12k std deduction. Mar 7, 2016 at 1:48
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    Could it be the realtor was simply talking about claiming a bigger number of dependents on the W4, to lessen withholding and increase net pay? I recall implementing a payroll system for my employer back in the 70's and being amazed to discover some employees were claiming 20 dependents just to bump their take-home by a few bucks. Mar 7, 2016 at 3:57
  • @JoeTaxpayer A starter home in a not-too-expensive part of the country you very well might not itemize. We have never itemized, only twice have I even done the calculations to see if we should itemize. Mar 7, 2016 at 4:19
  • The IRS W4 has a worksheet for doing the calculation in this answer. Mar 7, 2016 at 5:56

I brought this up to my CPA. She said don't do it. People used to do it, but now they're cracking down. Is it unfair? Yes. But it's the government so don't mess with them.

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    "Now they're cracking down" - what does this mean? If OP is making $250K, and already paying 5% to state ($12,500) the $800,000 house would give nearly $30K in interest and $12K in property tax. Add $20,000 in donations, and it's possible that the math will tell her to bump her allowances by as many as 10. As long as the math is done correctly, and the W4 filled out properly, reducing one's withheld tax is the right way to go to avoid a huge refund and have that money every paycheck. Mar 7, 2016 at 11:08
  • First off, I don't get the down votes, because people are responding to your answer and not the question she asked. What she's trying to ask is can she add additional dependents beyond what she's legally allowed so she can avoid paying income taxes on her monthly income. She wants to do this because she wants the money now instead of at the year end when she files a return. The answer to this as given to me by a CPA and a tax attorney who teaches tax law at top 10 law school is a big fat NO! Your answer is about itemizing and filing quarterly. Mar 7, 2016 at 22:32
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    Did you even read my answer? A withholding exemption is a request to not tax $4050 of income. A human dependent is 1 exemption, as is $4050 in deductible expenses. The W4 itself offers the math that equates the two. And the form fully supports my comment on your incorrect answer. The reason you are getting voted down is that you offer hearsay, not facts. You must have misunderstood the CPA, as I'm not so arrogant as to assume that I know more than her. Mar 7, 2016 at 23:23
  • But, I do know the facts, and I am certain of my answer to this question. If one is about to get a refund of more than marginal rate * $4050, they can bump their withholding allowance to avoid this. Mar 7, 2016 at 23:24
  • Adding an unwarranted dependent on a tax return != adding an exemption on form W4. Joe's answer is the second of those two and your CPA is referring to the first.
    – WBT
    Mar 8, 2016 at 4:29

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