Question

When the number of withholding allowances increases, the amount of income tax withheld _________.

1) increases
2) decreases
3) remains the same
4) cannot be determined

Answer 1

Increasing the number of withholding allowances typically results in a decrease of the amount of income tax withheld from an individual's paycheck, as more of the income becomes exempt from taxation.

Step-by-step explanation:

When the number of withholding allowances increases, the amount of income tax withheld typically decreases. This is because withholding allowances are deductions that decrease the amount of an individual's income that is subject to taxes.

Each withholding allowance effectively represents an exemption from taxes for a portion of income, thus reducing the tax that is withheld from a paycheck. It's important to note that while withholding less might increase your take-home pay, it could result in owing taxes when you file your return if not enough was withheld throughout the year.

When the number of withholding allowances increases, the amount of income tax withheld decreases.