The withholding allowance is an allowance that is tied to a certain amount of income tax. The greater the number of allowances you tell your employer to consider, the less income tax you will have withheld from your paycheck. There are various allowances you can claim including yourself, your spouse, and one for each dependent. It's important to understand that the goal is to report the right number of allowances to try and get the total amount withheld as close as possible to the amount you will owe in taxes for the year. If using allowances still doesn't result in the right amount of withholding, it is possible to claim fewer or more allowances. If there are any changes in your income or tax liability throughout the year, you can change the withholding allowance at any time.