W4 Exemptions

If you’re not required to file a federal income tax return, why withhold tax? Most commonly, students who work part time should fill out Form W4 and claim exemption from federal income tax withholding. If your gross income isn’t more than $12,550 which is the same as the 2025 standard deduction for single filers, you are exempt from filing a federal income tax return, thus. from federal income tax withholdig.

While this sounds fair and easy, make sure that you are in exempt status. If you’re not, it will result in major consequences where you will incur under-withholding penalties where you can pay a lot more than what you actually owe in taxes. So, be sure that you’re exempt from federal income tax withholding.

As a general rule, you can take the standard deduction as a reference point. If you expect to have no tax liability for the tax year you’re filing Form W4, you are exempt from withholding.

What’s the meaning of exemption from federal income tax withholding?

What being exempt from federal income tax withholding means that your employer won’t withhold federal income taxes from your income when processing payroll. However, other taxes such as Social Security and Medicare taxes will be withheld the same as everybody else. See the FICA Tax Rate 2025.

Claiming exempt status on Form W4 basically tells your employer to not withhold federal income tax from your income. This means you will have a higher take-home pay as you should since you’re not going to have tax liability. This comes in handy if you’re a student working part-time and you won’t owe any taxes.

How to claim exempt status?

On the 2023 edition of Form W4, claiming exempt status is fairly easy. All you need to do is fill out Step 1(a), Step 1(b), and Step 5 of the form and write exempt in the space under Step 4(c).

Where you need to enter “exempt” should look like this:

Upon claiming exempt status from federal income tax withholding, you will have a higher take-home pay. If your income changes at any point of the year, fill out a new Form W4 so that your employer is able to withhold sufficient enough to cover at least 90 percent of your tax liability.

Unsure whether or not you will owe taxes? Take the tax withholding estimator to get an idea of if you’ll owe taxes or get a refund from the IRS when you file your return.