What is one allowance worth to my paycheck?

The best way to determine how one additional allowance will change your take-home pay is to use the Form W-4 Withholding section to calculate the difference.

To quickly estimate how much one withholding allowance will change your federal income tax withholding; multiply your tax bracket rate by the amount of one exemption ($4,050 in 2016), then divide the result by the number of pay periods in one year.

Calculate the amount of one allowance per paycheck.

For example, if you are paid once a week and are in the 25% tax bracket, you want to add one withholding allowance to your Form W-4. What is this allowance worth?
Here’s how it works:

First take your tax bracket (25%) and multiply it bby a single allowance( X $4,050, the amount of one exemption) = $1,012.50 (the annual tax benefit of one exemption at the 25% tax bracket)

Second, take the amount and divide by the number of paychecks year and example of weekly which equals 52; $1,012.50 divided by / 52 weeks = $19.47.
This amount is the estimated additional on each pay check per week for the one allowance.

Example: you want to take six allowances. Multiply 19.47 times 6 allowances which would equal 19.47 times 6 = 116.82 and then multiply by 4 for a full month.

This equals $467.28 per month which can be used to help grow your business.

But before moving on, don’t forget your state income tax withholding as that will be affected too.

Receiving your first paycheck.

When you receive your first paycheck with the new withholding allowances, take note of how they affect your pay.

Take Note: Save your old paycheck stub. When you get your new paycheck stub, take the difference between the two, this is your additional take home pay. Visit the following link to understand what you need to do with this extra amount when starting your home-based business.

Your Home Based Business expenses will be used to reduce or eliminate your tax liability.