allowance
uh-LOW-unss
/əˈlaʊəns/
An amount of money that can be earned or spent without being taxed, or a reduction in withholding based on personal circumstances.
Often refers to 'withholding allowances' on a W-4 form, which tell your employer how much tax to hold back based on dependents.
The story behind the word. From Old French 'alouance', which combined two Latin roots: 'allaudare' (to praise/approve) and 'allocare' (to place/allocate). Thus, an allowance is an approved allocation of funds or permissions.
Word relationships
- allocation: Allocation is the action of distributing resources, while allowance is the specific amount permitted or allocated.
- concession: A concession is a thing that is granted, especially in response to demands, rather than a standard legal limit.
Commonly confused with
- deduction: An allowance is a pre-approved amount of tax-free income or a withholding adjustment factor, while a deduction is a subtraction based on actual expenses incurred.
Word family
- allow (verb): To permit or let happen.
- allowable (adjective): Allowed or permitted by law.
Collocations
- withholding allowance
- personal allowance
- claim an allowance
- tax allowance
Example sentences
- "He claimed an extra withholding allowance for his new dependent." New Employee Onboarding
Memory hook
The government 'allows' you to keep a certain amount of money tax-free. What you are allowed to keep tax-free.
When not to use
Do not confuse with a child's pocket money (allowance), though they share the same origin of 'permitted allocation'.
Fun facts
- In the UK, the 'Personal Allowance' is the amount of income you can receive entirely tax-free each year, which is currently over £12,500.
Related words
Also appears in
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