If your gross income is $100,000 and you qualify for a standard deduction of $12,950, how much do you save in taxes with an effective tax rate of 22%?

To determine the tax savings from the standard deduction, we first need to calculate the taxable income. With a gross income of $100,000 and a standard deduction of $12,950, the taxable income would be computed as follows:

Taxable Income = Gross Income - Standard Deduction

Taxable Income = $100,000 - $12,950

Taxable Income = $87,050

Next, to find out how much tax is owed on this taxable income, we apply the effective tax rate of 22%. This is done by calculating:

Tax Owed = Taxable Income × Effective Tax Rate

Tax Owed = $87,050 × 0.22

Tax Owed = $19,191

To find the tax savings from the deduction, we consider how much tax would be owed without the deduction. If the entire gross income of $100,000 were subject to taxation at the same rate:

Tax Without Deduction = Gross Income × Effective Tax Rate

Tax Without Deduction = $100,000 × 0.22

Tax Without Deduction = $22,000

Now, we calculate the savings due to the standard deduction:

Tax Savings = Tax Without Deduction - Tax Owed

Tax Savings