A withholding allowance is an exemption that reduces the amount of income tax an employer withholds from an employee’s paycheck.
The Internal Revenue Service (IRS) Form W-4 is used to calculate and claim withheld benefits.
The withholding amount is based on taxpayer status at the time of filing the tax return: single or married but filing separately, married and filing jointly, or head of household, and the amount of tax benefits they claim.
The more tax credits you claim, the less income tax will be withheld from your paycheck, and vice versa.
Individuals are required to file a new Form W-4 whenever their personal or financial situation changes.