Exemptions are the number of filers and dedendents that are claimed on the individual inocme tax return. Each exemption is a deduction of a certain amount for the year. The exemption amount is adjusted for inflation. Exemption deduction does phase out over an income limit so very high income taxpayers get no deduciton for exemptions.
Allowances is the number that is chosen on Form W-4 used to compute the amount of federal tax withheld each paycheck for an employee. The higher the number of allowances, the less tax that is withheld.
In simple cases, the number of exemptions and allowances will be the same. A single person that neither has much other income or deductions that are more than the standard deduction will use one allowance and have a proper amount of income tax withheld. If that same person had significant other income (like interest or dividends) using zero allowances would allow for more income tax withheld so there is enough for the other income as well as the wages. If that same person has significant deductions, or other losses that reduce income, using more allowances (2 or 3) would result in less income tax withheld.
There are a num ber of calculators available online that will compute the amount withheld based on your amount of pay, how often you are paid and the number of allowances on the W-4. For example, see http://www.taxhelpinfo.us/calc-tax.html for:
Payroll DeductionsUse this calculator to help you determine the impact of changing your payroll deductions. You can enter your current payroll information and deductions, and then compare them to your proposed deductions. Try changing your withholdings, filing status or retirement savings and let the payroll deduction calculator show you the impact on your take home pay.Hourly Paycheck CalculatorInput the gross hourly rate and the number of hours worked and the Hourly Paycheck Calculator estimates net pay (or take-home pay) after taxes and deductions are withheld.
I hope this helps.