Hi Ksageel,
Yes, adding dependents on Step 3 reduces with tax withholding. However, spreading $4,000 over the year plus your pay increase minimize the take home pay impact.
To have less tax withheld, you can increase W-4, Step 4(b) Deductions; reduce the number on Step 4(a) or 4(c), or even increase the number of dependents on Step 3.
However, the whole exercise is to have tax withholding close to your ultimate income tax liability for tax year 2022.
Caution: If you have too little tax withheld, you will generally owe tax when you file your tax return and may owe a penalty unless you make timely payments of estimated tax.
Hope the above helps.
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