You claim as many allowances as you need to avoid over withholding. Iu2019ve used dozens when complex situations unexpectedly got me months ahead of schedule or beyond my total tax liability for the year.Theyu2019re allowances not dependents. The IRS Form W-4 instructions explicitly tell you to increase them to account for things like itemized deductions.Thereu2019s no limit as long as youu2019re withholding substantially all of your taxes in a timely manner after income is earned.Refer to IRS Topic No. 306 Penalty for Underpayment of Estimated Tax and IRS Publication 505 (2022), Tax Withholding and Estimated Tax for the safe harbor rules. Provided the payments were timely, penalties for under withholding arenu2019t assessed when you withhold the least of $1000 less than your total liability, 90% of this yearu2019s total, and 100% (110% for income over $75K married filing separately or $150K otherwise) of last yearu2019s income tax.You can supplement your W-4 withholding with quarterly estimated tax payments when earnings vary from unpredictable situations like bonus, stock value when restrictions lapse, and capital gains/losses.I track my projected earnings and year to date withholding in a text file, recalculate my remaining state and federal income taxes when my situation changes, and work backwards from that to a number of allowances plus extra using formulas in IRS Publication 15 (Circular E) Employeru2019s Tax guide and Method B from the California DE 44 Employeru2019s guide. Unlike the W-4 and California DE-4 worksheets this accounts for year-to-date withholding and does not round up.I aim for $500 state and federal refunds so if Iu2019m busy in the first quarter I can defer filing without penalty.