At this time, there is uncertainty over which income tax rates will apply for 2013. The uncertainty stems from the EGTRRA sunset and the extent to which Congress may alter it. Using recently released inflation data, the following tax rate schedules that would apply for 2013 if current rates are extended. In this article, I have included the rate schedules that would apply for 2013 if the EGTRRA sunset kicks in. The article also includes the tax rate schedules that would apply if the President’s proposal were adopted.
If the EGTRRA sunset kicks in, the 10% bracket would be eliminated, the 15% bracket would include income previously taxed at 10%, and the 25%, 28%, 33%, and 35% brackets would be increased to 28%, 31%, 36%, and 39.6%, respectively. Except for the elimination of the 10% bracket, the range of the brackets would be exactly the same as if the EGTRRA sunset did not apply at all, except for married taxpayers where the 15% range for married taxpayers filing jointly would end at 167% of the amount at which the range for single taxpayers ends, and the 15% range for married taxpayers filing separately would end at half the amount at which the range for married taxpayers filing jointly ends. While there seems to be little support for having the EGTRRA sunset apply in full, I have reproduced what the projected ranges for tax brackets and taxes for 2013 would be if that did happen, e.g., because Congress and the Administration could not reach an agreement on what the rates and brackets should be for next year.
Here are the alternative rate schedules.
Tax rate schedules if the EGTRRA sunset applies. As inflation-adjusted by RIA, the tax rate schedules for 2013 would be as follows if the EGTRRA sunset applies:
- FOR MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES, THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $60,550 15% of taxable income
Over $60,550 but not $9,082.50 plus 28% of the
over $146,400 excess over $60,550
Over $146,400 but not $33,120.50 plus 31% of the
over $223,050 excess over $146,400
Over $223,050 but not $56,882.00 plus 36% of the
over $398,350 excess over $223,050
Over $398,350 $119,990.00 plus 39.6% of the
excess over $398,350
FOR SINGLE INDIVIDUALS (OTHER THAN HEADS OF HOUSEHOLDS AND SURVIVING SPOUSES), THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $36,250 15% of taxable income
Over $36,250 but not $5,437.50 plus 28% of the
over $87,850 excess over $36,250
Over $87,850 but not $19,885.50 plus 31% of the
over $183,250 excess over $87,850
Over $183,250 but not $49,459.50 plus 36% of the
over $398,350 excess over $183,250
Over $398,350 $126,895.50 plus 39.6% of the
excess over $398,350
- FOR HEADS OF HOUSEHOLDS, THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $48,600 15% of taxable income
Over $48,600 but not $7,290.00 plus 28% of the
over $125,450 excess over $48,600
Over $125,450 but not $28,808.00 plus 31% of the
over $203,150 excess over $125,450
Over $203,150 but not $52,895.00 plus 36% of the
over $398,350 excess over $203,150
Over $398,350 $123,167.00 plus 39.6% of the
excess over $398,350
- FOR MARRIEDS FILING SEPARATE RETURNS, THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $30,275 15% of taxable income
Over $30,275 but not $4,541.25 plus 28% of the
over $73,200 excess over $30,275
Over $73,200 but not $16,560.25 plus 31% of the
over $111,525 excess over $73,200
Over $111,525 but not $28,441.00 plus 36% of the
over $199,175 excess over $111,525
Over $199,175 $59,995.00 plus 39.6% of the excess over $199,175
- FOR ESTATES AND TRUSTS, THE 2013 RATEBRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $2,450 15% of taxable income
Over $2,450 but not $367.50 plus 28% of the
over $5,700 excess over $2,450
Over $5,700 but not $1,277.50 plus 31% of the
over $8,750 excess over $5,700
Over $8,750 but not $2,223.00 plus 36% of the
over $11,950 excess over $8,750
Over $11,950 $3,375.00 plus 39.6% of the excess over $11,950
Tax rate schedules if President’s proposal were adopted. The tax rate schedules for 2013 as appearing in JCS-2-12 would be as follows:
- FOR MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES, THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $17,800 10% of taxable income
Over $17,800 but not $1,780.00 plus 15% of the
over $72,300 excess over $17,800
Over $72,300 but not $9,955.00 plus 25% of the
over $145,900 excess over $72,300
Over $145,900 but not $28,335.00 plus 28% of the
over $222,300 excess over $145,900
Over $222,300 but not $49,747.00 plus 33% of the
over $246,200 excess over $222,300
Over $246,200 but not $57,634.00 plus 36% of the
over $397,000 excess over $246,200
Over $397,000 $111,922.00 plus 39.6% of the excess over $397,000
- FOR SINGLE INDIVIDUALS (OTHER THAN HEADS OF HOUSEHOLDS AND SURVIVING SPOUSES), THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $8,900 10% of taxable income
Over $8,900 but not $890.00 plus 15% of the
over $36,150 excess over $8,900
Over $36,150 but not $4,978.00 plus 25% of the
over $87,550 excess over $36,150
Over $87,550 but not $17,828.00 plus 28% of the
over $182,600 excess over $87,550
Over $182,600 but not $44,442.00 plus 33% of the
over $202,900 excess over $182,600
Over $202,900 but not $51,140.00 plus 36% of the
over $397,000 excess over $202,900
Over $397,000 $121,016.00 plus 39.6% of the excess over $397,000
- FOR HEADS OF HOUSEHOLDS, THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $12,700 10% of taxable income
Over $12,700 but not $1,270.00 plus 15% of the
over $48,400 excess over $12,700
Over $48,400 but not $6,625.00 plus 25% of the
over $125,000 excess over $48,400
Over $125,000 but not $25,775.00 plus 28% of the
over $202,450 excess over $125,000
Over $202,450 but not $47,461.00 plus 33% of the
over $224,550 excess over $202,450
Over $224,550 but not $54,754.00 plus 36% of the
over $397,000 excess over $224,550
Over $397,000 $116,836.00 plus 39.6% of the excess over $397,000
- FOR MARRIEDS FILING SEPARATE RETURNS, THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $8,900 10% of taxable income
Over $8,900 but not $890.00 plus 15% of the
over $36,150 excess over $8,900
Over $36,150 but not $4,977.00 plus 25% of the
over $72,950 excess over $36,150
Over $72,950 but not $14,177.00 plus 28% of the
over $111,150 excess over $72,950
Over $111,150 but not $24,873.00 plus 33% of the
over $123,100 excess over $111,150
Over $123,100 but not $28,817.00 plus 36% of the
over $198,500 excess over $123,100
Over $198,500 $55,961.00 plus 39.6% of the
excess over $198,500
- FOR ESTATES AND TRUSTS, THE 2013 RATE BRACKETS WOULD BE:
If taxable income is: The tax would be:
Not over $2,300 15% of taxable income
Over $2,300 but not $345.00 plus 25% of the
over $5,450 excess over $2,300
Over $5,450 but not $1,132.50 plus 28% of the
over $8,300 excess over $5,450
Over $8,300 but not $1,930.50 plus 36% of the
over $11,350 excess over $8,300
Over $11,350 $3,028.50 plus 39.6% of the excess over $11,350
observation: The assumed inflation adjustments in the President’s proposal are slightly lower than what RIA projects based on recently released inflation data.
observation: If Congress fails to act to prevent the EGTRRA sunset from affecting all tax brackets, then all taxpayers will end up paying higher taxes including those that would be taxed at 36% and 39.6% under the President’s proposal.
observation: Republican Presidential candidate Mitt Romney has proposed a 20% across-the-board reduction in tax rates, which would result in six rates of 8%, 12%, 20%, 22.4%, 26.4%, and 28%. However, the Romney campaign has not yet released the breakpoints for these rates.