Starting a new job is a whirlwind of paperwork. Among the most important documents you’ll sign is IRS Form W-4, the Employee’s Withholding Certificate. This form tells your employer how much federal income tax to take out of your paycheck.
If you have children or support a relative, Step 3 of the W-4 is where you “Claim Dependents.” Getting this right means more money in your pocket every payday. Getting it wrong could mean a surprise bill when you file your taxes.
In this guide, we’ll walk you through the updated rules for 2025 and 2026, including the new tax credit amounts introduced under recent legislation.
Why Claiming Dependents Matters
Every dependent you claim reduces the amount of tax your employer withholds. Essentially, the government acknowledges that you have extra expenses (like food, clothing, and care) and allows you to keep more of your gross pay to cover those costs.
Who Qualifies as a Dependent?
Before you fill out the form, you need to know who you can legally claim. There are generally two categories:
1. Qualifying Children
To claim a child in Step 3, they must:
- Be under age 17 at the end of the year.
- Be your son, daughter, stepchild, foster child, brother, sister, or a descendant (like a grandchild).
- Have lived with you for more than half the year.
- have not provided more than half of their own financial support.
2. Other Dependents
This includes older children (ages 17–24 if they are students) or elderly parents you support. They must meet specific IRS residency and support tests.
Step-by-Step: Filling Out Step 3 on the W-4
The 2026 version of Form W-4 has been updated to reflect inflation and new tax laws (like the OBBBA). Here is how to do the math:
Part A: Qualifying Children (The $2,200 Credit)
For the 2025 and 2026 tax years, the Child Tax Credit has increased.
- The Rule: Multiply the number of qualifying children under age 17 by $2,200.
- Example: If you have 2 children, you would write $4,400 on line 3(a).
Part B: Other Dependents (The $500 Credit)
For any other person you support who doesn’t qualify for the full Child Tax Credit:
- The Rule: Multiply the number of other dependents by $500.
- Example: If you support an elderly parent living with you, write $500 on line 3(b).
Part C: Totaling it Up
Add both amounts and enter the total in the box for Step 3. This total dollar amount tells your employer exactly how much to reduce your annual withholding.
Important Rules for Multi-Income Households
A common mistake occurs when both spouses work. If you and your spouse are Married Filing Jointly, the IRS recommends:
“Only the highest-paying job in the household should complete Step 3.”
If both spouses claim the same children on their separate W-4s, your employer will withhold too little tax, and you may owe a penalty at the end of the year.
When Should You Update Your W-4?
You don’t just fill this out when you start a job. You should submit a new W-4 to your HR department whenever:
- You have a new baby (Congrats! That’s an extra $2,200 credit).
- A dependent child turns 17 (they now move from the $2,200 category to the $500 category).
- You get married or divorced.
- Your income changes significantly.
Use a Calculator to Double-Check
Tax laws are complex, and the W-4 is just an estimate. To be 100% sure you aren’t overpaying or underpaying, use our U.S. States Salary Calculator. You can input your dependents and see a real-time estimate of your Net Pay after these credits are applied.
Conclusion
Claiming dependents on your W-4 is the easiest way to increase your take-home pay legally. For 2025 and 2026, make sure you are using the new $2,200 per child calculation to get every dollar you deserve. Keep your family’s financial health on track by staying updated with the latest IRS changes.