If you're a higher income earner, take a good long look at your 2012 return.
It will be the last one for a while — at least until 2017 and only then if a Republican moves into the White House — where your top ordinary income tax rate will be 35 percent.
This time next year, you'll face a top income tax rate of 39.6 percent.
To acknowledge the changing tax rates, today's Daily Tax Tip presents the 2012 and 2013 income tax rates and income brackets.
The table below shows the rates and income ranges that will be used to calculate your 2012 tax liability.
| Tax Rate |
Single |
Head of Household |
Married Filing Jointly or Surviving Spouse |
Married Filing Separately |
| 10% |
Up to $8,700 |
Up to $12,400 | Up to $17,400 |
Up to $8,700 |
| 15% | $8,701 to $35,350 | $12,401 to $47,350 | $17,401 to $70,700 | $8,701 to $35,350 |
| 25% | $35,351 to $85,650 | $47,351 to $122,300 | $70,701 to $142,700 | $35,351 to $71,350 |
| 28% | $85,651 to $178,650 | $122,301 to $198,050 | $142,701 to $217,450 | $71,351 to $108,725 |
| 33% | $178,651 to $388,350 | $198,051 to $388,350 |
$217,451 to $388,350 |
$108,726 to $194,175 |
| 35% | $388,351 or more | $388,351 or more | $388,351 or more |
$194,176 or more |
I know many of you are anxious to get your 2012 tax return in to the Internal Revenue Service.
While the IRS has announced that it won't accept or start processing any returns until Jan. 30, you can go ahead and get started.
Fill out the forms that are available and if you have all that you need, go ahead and e-file your return.
Your tax software company or paid tax professional will hold your return until the IRS is ready to take it. If you send in dead-tree paper forms to the IRS, they'll just sit there in your IRS processing office until Jan. 30.
But at least the paperwork, whether actual or digital, will be off your desk and in Uncle Sam's hands.
2013 tax rate, bracket changes: Now that you're through with your 2012 taxes, let's move to 2013 tax planning.
The 2013 income tax rates and brackets were finally made official on Friday. That's when the IRS issued the second part of its 2013 inflation adjustments.
You probably recall that back in October 2012 the IRS announced some of the inflation tweaks (most notably for retirement plan contributions), but had to wait on the rest until Congress came up with a fiscal cliff fix.
That deal, the American Taxpayer Relief Act of 2012, included the new top income tax bracket of 39.6 percent on earnings in 2013 of more than $400,000 for single taxpayers and $450,000 for married joint filers.
Here are all the rates and income brackets for 2013 taxes.
| Tax Rate |
Single |
Head of Household |
Married Filing Jointly or Surviving Spouse |
Married Filing Separately |
| 10% |
Up to $8,925 |
Up to $12,750 | Up to $17,850 |
Up to $8,925 |
| 15% | $8,926 to $36,250 | $12,751 to $48,600 | $17,851 to $72,500 | $8,926 to $36,250 |
| 25% | $36,251 to $87,850 | $48,601 to $125,450 | $72,501 to $146,400 | $36,251 to $73,200 |
| 28% | $87,851 to $183,250 | $125,451 to $203,150 | $146,401 to $223,050 | $73,201 to $111,525 |
| 33% | $183,251 to $398,350 | $203,151 to $398,350 |
$223,051 to $398,350 |
$111,526 to $199,175 |
| 35% | $398,351 to $400,000 | $398,351 to $425,000 | $398,351 to $450,000 | $199,176 to $225,000 |
| 39.6% | $400,001 or more | $425,001 or more | $450,001 or more |
$225,001 or more |
Remember, these are the tax rates applied to wage or salary income. Investment income is still taxed at lower rates.
And in both 2012 and 2013, just because your earnings technically put you in the top tax bracket, you're not paying that percentage on all your income.
The progressivity of the tax system means that the highest tax rate you face is the one that's collected on your last or last batch of dollars earned, not every single dollar.
So a couple with taxable income after adjustments (aka above-the-line deductions) and exemptions (for themselves and dependents, albeit reduced* in 2013) and deductions (itemized write-offs will, like exemptions, also be cut* for higher earners) of $455,000 will see the new 39.6 percent tax apply to just $4,999 of their income.
*These reductions are known as PEP, or personal exemption phaseout, and Pease for the deductions. You can read more about them in the Rich for tax deduction, exemption purposes section of my earlier Redefining 'wealthy' for tax purposes blog post.
Whether you're working on your 2012 return or already looking for ways to cut your 2013 tax bill, these rate and bracket tables should help.
You also might find these items of interest:
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Naina
Thanks for writing such an informative article.I like reading your posts.
Both of these bracket changes from 2012 and 2013 might or might not be beneficial for those planning their taxes. The Income Tax rate increase to 39.6 percent does not seem to make the tax payers very happy.
Even i have an Income tax blog; do share your comments on that.
Income Tax slab