Taxes Federal and State Income Taxes All items of pay are subject to Federal Income Tax Withholding (FITW). The number of exemptions that you claim will affect the amount that is deducted; you can change this number through myPay. Each state has different procedures for State Income Tax Withholding. Various states are exempt from withholding while others are subject to the same amount as FITW, to claim exemption for a certain state you can fill out a DD Form 2558-1. You can change you State of Legal Residence by filling out a DD Form 2558. We recommend you speak with Base Legal to ensure you can legally change you withholding state before doing so.