The more allowances an employee claims, the effect on federal income tax withholding is what?

When an employee claims more allowances on their W-4 form, it results in less federal income tax being withheld from their paycheck. This is because the number of allowances claimed is a direct factor in determining the amount of taxable income that is subject to withholding. Each allowance essentially reduces the amount of income that is considered taxable, hence resulting in a lower withholding amount.

In practical terms, when an employee claims additional allowances, they are indicating that they expect to have deductions, credits, or other tax situations that will reduce their total tax liability. Consequently, the payroll system will adjust the amount of federal income tax withheld accordingly, reflecting a lower withholding amount based on the increased allowances claimed. This ultimately means that employees will take home more of their earnings upfront, but it's important to consider that if too few taxes are withheld, they may owe at tax time.