<prompt> Human: Since personal tax exemptions are no longer a thing with the new tax reform, does that mean that the question of claiming 0 or 1 on your W-2 for tax withholdings is also no longer a question? I always just claimed 0 so I got a nice bonus every tax season not the best at saving, so this is a forced savings mechanism that I enjoy...I get that its a free loan to Uncle Sam, not my question here  <response>: No, you can still use allowances to suggest to withholding system how much of your annual income it should presume is untaxed. Recently revised withholding tables show that the following formulas govern this in 2018:single not taxed 3700 4150 number of allowancesThis shows that the size of an allowance is 4150, and that if you use 2 allowances the algorithm knows you expect 12000 of your income to be not taxed. It will calculate your tax assuming gross 12000 is your taxable income. This agrees with the new standard deduction amount.For people using the Married check box on W-4, this is the formula:married not taxed 11550 4150 number of allowancesWith this, using 3 allowances conveys that you expect 24000 of your income to be not taxed. This is analogous to current W-4, which also presumes 3 as baseline setting for married see W-4 lines A, B, C.---You will still use adjustments of the allowances number to personalize your withholding.Example 1 deductions: Suppose you are single and have 2500 student loan interest deduction and you also contribute 2000 to a traditional IRA. You know these things are deductible, so withholding should consider another 4500 of your income as not taxed. Since 45004150 1.08, you would ignore decimal part and add 1 allowance to your baseline 2. You would write 3 allowances on W-4.Example 2 tax credits:Suppose you are married and have 1 kid you expect to get child tax credit of 2000 for, and you are in 24 tax bracket. To mimic your tax dropping by 2000, you suggest it is same as having 20000.24 8333 less income taxable. Since 83334150 2.00, you would add 2 allowances to your baseline 3. You would write 5 allowances on W-4.Example 3 forced savings via refund:Suppose you are single earning 30000 and are in 12 tax bracket. You decide to use 0 allowances instead of the baseline 2.Algorithm thinks your untaxed income is 3700 4150 0, which is just 3700, not 12000. It imagines your taxable income is 30000 3700 26300. It predicts your income tax using tax brackets: 9525 10 16775 12 953 2013 2966 for the year. Youd see 114 taken from each biweekly paycheck.When you file, you actually get to deduct 12000, not 3700, which means 8300 less of your income is taxed at 12, and you should thus find you have overpaid by 8300 12 996. Indeed, your taxable income is 30000 12000 18000, and your tax is 9525 10 8475 12 1970. Since you paid 2966 but only owe 1970, you get a refund of 996, as expected. You had 114 taken from each of 26 paychecks when really you could have just had 76 taken from each paycheck. That extra 38 taken from every paycheck is what gets sent back to you as your refund. You might think of it as stuffing your mattress with 38 from every paycheck, then the following May pulling your whole stash out from under the mattress. 