Get your taxes done using TurboTax

You have focused on the dependent deduction on the W-4.  Since 2018 we no longer get a dependent tax exemption deduction, so the impact is reduced.

The more significant issue is reflected in Step 4 of the W-4.  This sections provide for other income that is earned in the household.  Both you and your wife should update your W-4's to reflect your spouse's income and self employment income.

Be aware that not only is self-employment taxed as income, but there is a additional 15.3% tax for Social Security and Medicare.