How much tax can be saved if John shifts $2,000 of income to his 18 year old dependent son? John is in the 22 percent tax bracket and his son has no other income that is taxable in 2018.

Question

Quizplus · Accepted Answer

Since John is in the 22 percent tax bracket, shifting $2,000 to his son would save him 22 percent of that, which is $440. However, since the son has no other taxable income, $2,000 of his income would fall under the standard deduction and be tax-free. This means that John would only save 22 percent of the remaining $2,000 - $12,000 (standard deduction for single filers in 2018), which equals $345.

How Much Tax Can Be Saved If John Shifts $2,000