Optimal W4 filing status

Hi,  pjcjr0314

 

The first question to answer is whether you qualify for the Head of Household (HOH status).  To be considered a head of household, you must file an individual return, be considered unmarried, not be claimed on someone else’s tax return and be able to claim a qualifying dependent on your return.  You can learn more about the HOH requirements here.

 

Assuming you do qualify, claiming HOH status on your W-4 would result in lower tax withholding versus claiming single if all other factors are constant.  If your goal is to have less taken out during the year, then yes, HOH status would do that for you.  Some people want to withhold a little extra, in hopes they won't owe anything or get a bigger refund (all at once) when you file for taxes.  Assuming you qualify for HOH status, I would say it comes down to your preference. Do you want:

• A little more money in your hands each paycheck (and less of an interest free loan to the IRS).  Then use HOH status if you qualify.  However, you may end up owing at the end of the year.
• To owe less at the end of the year and perhaps get a bigger chunk of money all at once?  If so, consider single status.

No absolute right or wrong answer on this one.  It's up to you.  Do know if you are significantly under withheld (more than $1K) you may be subject to an underpayment penalty. More about that here.

 

Cheers!!

 

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