Can I claim exempt from withholding on my W-4 for 2025?

Be really careful about claiming exempt. This isn't just about adjusting your withholding - it's a specific declaration that you expect to have ZERO tax liability. Based on what you shared, you probably shouldn't claim exempt since you had a tax liability last year ($1,200) and will likely have some liability this year too, even with your lower income and new deductions. At $48k, you'll still have taxable income after the standard deduction (which is $14,600 for single filers in 2025). Instead of claiming exempt, you should adjust your W-4 to reduce withholding. The current W-4 doesn't use allowances anymore, but you can add an amount on line 4(b) for deductions beyond the standard deduction, or specify an additional amount to withhold (or reduce withholding) on line 4(c). If you incorrectly claim exempt and end up owing, you could face underpayment penalties if you owe more than $1,000 at tax time and haven't had at least 90% of your tax liability withheld throughout the year.

After dealing with a similar situation last year, I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out the exact right withholding amount instead of going completely exempt. I was getting huge refunds like you and needed more in my paycheck, but I was worried about claiming exempt. The tool analyzed my tax situation including all my deductions and showed me exactly how to fill out my W-4 to get more money in each paycheck without risking penalties. It was super helpful because it showed me how much I should expect to owe or get refunded with different withholding scenarios. Much better than just guessing or going completely exempt when you're not 100% sure you qualify. It also helped me understand which of my deductions would actually help reduce my tax liability versus just assuming they would.

I was skeptical about taxr.ai at first but decided to try it after my withholding mess last year. Just wanted to update that it actually worked really well for my complicated situation with multiple income sources. I followed their W-4 recommendations in March, and it's kept me from getting a huge refund while also making sure I'm not underpaying. The best part was seeing exactly how much I'd get in each paycheck with different withholding scenarios before I submitted my new W-4 to HR. I used to always claim "0" on the old W-4 because I was paranoid about owing, but that meant I was lending thousands to the government interest-free every year. Now my withholding is much more balanced.

If you're concerned about your withholding but also having trouble reaching the IRS for specific guidance (which I was when trying to figure this out), I'd recommend using Claimyr (https://claimyr.com). I was on hold with the IRS for HOURS trying to get help with my withholding situation after changing jobs mid-year. Claimyr got me through to an actual IRS agent in about 20 minutes when I had been trying for days on my own. The agent walked me through exactly how to fill out my W-4 for my specific situation to avoid both underpayment penalties and excessive withholding. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Seriously saved me so much stress and I actually got official guidance instead of just guessing.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself because I've been trying to reach the IRS about a withholding issue for weeks with no luck. It actually worked exactly as described. I went for a run, made dinner, and was literally watching Netflix when I got the call that an IRS agent was on the line. Took about 1.5 hours total but I didn't have to listen to that awful hold music or worry about accidentally hanging up. The IRS agent I spoke with was super helpful about my withholding questions and confirmed that claiming exempt would've been a huge mistake in my situation. She helped me calculate the right adjustments for line 4(b) and 4(c) instead.

Have you considered simply increasing your allowances instead of going fully exempt? I've been doing this for years. I claim 3 allowances even though technically I should only claim 1 based on my situation. This reduces my withholding enough that I get a small refund (usually around $500) instead of a massive one, but I'm not risking penalties by claiming exempt.

Whatever you do, DON'T claim exempt if you don't truly qualify. My friend did this last year because she wanted more money in her checks, and she ended up owing $4,200 at tax time PLUS a $420 penalty. She had to set up a payment plan with the IRS and it was a whole mess.

Based on your situation, I'd strongly advise against claiming exempt. You had $1,200 in tax liability last year, which automatically disqualifies you from claiming exempt status. The IRS requires ZERO tax liability in the prior year AND an expectation of zero liability for the current year. At $48k income, even with your new deductions, you'll likely still have some tax liability after the standard deduction. Instead, use the current W-4 form to adjust your withholding: - Line 4(b): Enter estimated annual deductions above the standard deduction (like your mortgage interest, property taxes, student loan interest) - Line 4(c): You can specify an additional amount to reduce from each paycheck This approach will get you more money in your paychecks without the risk of penalties. If you end up owing more than $1,000, you could face underpayment penalties on top of the tax bill. Consider running some numbers first - maybe use the IRS withholding calculator or speak with a tax professional to find the sweet spot between getting more cash flow now and avoiding a big bill later.

I completely agree with the advice to avoid claiming exempt in your situation. Having $1,200 in tax liability last year means you don't meet the qualification requirements, and at $48k you'll still have taxable income even with your new deductions. One thing I'd add - when you're filling out the new W-4, be conservative with your estimates on line 4(b). It's better to slightly over-withhold and get a small refund than to under-withhold and face penalties. You can always adjust your W-4 again later in the year if you find your withholding is still too high. Also, keep track of your deductions throughout the year. Things like mortgage interest and property taxes can vary, and you want to make sure your withholding adjustments are based on realistic numbers. The IRS withholding calculator (on their website) can help you run different scenarios as your situation changes. Remember, the goal is to get closer to breaking even at tax time, not necessarily to owe nothing. A small refund of a few hundred dollars is actually ideal - it means you got most of your money throughout the year but didn't underpay.

I'm glad to see everyone steering you away from claiming exempt - that would definitely be a mistake in your situation. With $1,200 in tax liability last year, you don't qualify for exempt status regardless of your income change. Here's a practical approach for your W-4 adjustment: Start by calculating your expected deductions above the standard deduction ($14,600 for 2025). Your mortgage interest, property taxes, and student loan interest could easily add up to several thousand dollars. Let's say they total $8,000 - you'd enter that amount on line 4(b). For line 4(c), you might want to reduce withholding by an additional $50-100 per paycheck to account for your lower income bracket, but be conservative here. You can always submit a new W-4 later if you're still getting too much withheld. The key is finding the balance between better cash flow and avoiding penalties. Given your tight budget, even a small underpayment penalty would hurt, so err on the side of caution. You might still get a refund, but it should be much smaller than the $3,800 you got last year. Consider keeping track of your year-to-date withholding on your pay stubs and run the IRS calculator every few months to make sure you're on track.