The way how claiming more allowances on a W-4 form affect the deductions on a paycheck is shown in the second option: less will be deducted for taxes. The W-4 form is meant to tell the employer the actual amount of tax to withhold from a paycheck. There is an unwritten law of this system: the more allowances you claim, the less tax will be withheld from each paycheck. And the same happens with fewer allowances- the larger withholding amount, which can lead to a refund.
