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 2019.

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Quizplus · Accepted Answer

John can save $345 in taxes by shifting $2,000 of income to his son. This is because the son, with no other taxable income, would be taxed at a lower rate. The first $1,050 of the son's income is not taxed due to the standard deduction for dependents, and the next $950 is taxed at 10%, resulting in $95 of tax. If John had kept the income, it would have been taxed at his rate of 22%, amounting to $440. The savings are the difference between what John would have paid ($440) and what his son pays ($95), which is $345.

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