Withholding Allowance

Definition: A value claimed by an employee on Form W-4 that reduces the amount of federal income tax withheld from each paycheck. Each allowance corresponds to…

A value claimed by an employee on Form W-4 that reduces the amount of federal income tax withheld from each paycheck. Each allowance corresponds to a portion of income that is not subject to withholding. The 2020 redesign of Form W-4 replaced allowances with a system based on filing status, dependents, and additional adjustments.