Projected income tax rate schedules for 2013 under two alternative scenarios

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.

 

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