How To Adjust Your Withholding To Maximize Your Paycheck in 2025

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Who doesn’t want to make more money on payday? It just might be possible to do so without getting a raise.

If your paychecks feel a little too thin every time but your salary is decent, the issue might be that you’ve got your withholding set inaccurately or in a way that’s not allowing you to get the most out of your earnings.

Here are tips for how to adjust your withholding to maximize your paycheck in the new year.

What Is Withholding?

When you come on board as a new employee of a business, you must fill out an IRS form known as a W-4. This helps the company know how much to withhold in federal taxes from each paycheck. Prior to 2020, you would select a withholding number that made the most sense for your tax situation. Since the Tax Cut and Jobs Act of 2017, however, the IRS did away with that process for a simplified version (through 2025).

Other common taxes you may see taken from your check include:

• State income tax: In those states that have a state income tax, you’ll see money taken out of your check for that.
• Local taxes: These taxes may appear as well, which fund public systems in your city or county.
• Social Security tax: Most often noted as OASDI on your pay stub, this is the share you pay into your Social Security credits for retirement.
• Medicare tax: You and your employer pay a 1.45% Medicare tax toward healthcare in retirement.

Follow This Five-Step Process

Most people must complete a five-step process to determine their withholding. It goes as follows:

1. Enter your personal information. This includes your name, address and Social Security number, as well as anticipated filing status. This information will determine the standard deduction and tax rates used to calculate your withholding.
2. State if you have multiple jobs or your spouse works. If you work more than one job, or you’re filing jointly and your spouse also works, you list that here. 
3. Use the IRS withholding estimator. If you or your spouse have any self-employment income, you should use this tool or you can use the multiple jobs worksheet.
4. Select the standard deduction. If there are only two standard jobs between you and your spouse, you receive the standard deduction. That’s $29,200 for married-filing-jointly and $14,600 for individuals.
5. Claim dependents and other credits. At this step, you ascertain if you’re eligible for any credits, such as the child tax credit, or other credits related to dependents. These will reduce your expected taxes owed.

How To Reduce Withholding and Maximize Pay

A key sign that your withholding might be too high is if you are getting a tax refund at the end of the year. While that might seem like a cool thing, the fact is you could be taking that money home all throughout the year in your paycheck to save or invest, instead. So ideally you want to look to see if you’re eligible for a tax credit or other deductions beyond the standard deduction (such as itemized deductions, IRA contribution deductions or student loan interest deductions, to name a few).

If one or more of the following factors occurs, it may warrant a change in your withholding, netting you more money in your paycheck, so be sure to change your withholding to reflect this:

• A major life change
• A new job 
• A change in income (such as side gig income or gains on investments)
• Marriage or divorce
• The birth of, or adoption of, a child
• The purchase of a home

To get the most out of every paycheck, make sure you aren’t overlooking any key area that affects your finances. You can always consult with an accountant first.

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