It is widely thought that this will be the last year of Bush-Era tax cuts. These tax cuts were implemented in 2001 under the Presidency of George W. Bush, and a second Act for these cuts was signed in 2003. These tax cuts which started in 2001, have ran their course through 2011, where President Obama extended the cuts through the year 2012. It is a popular opinion that the marginal tax rates will not remain as they are in 2013. Changes are a hot topic, and more than likely changes will be made. Below are the 2012 tax brackets.
Calculating your marginal tax rate and discovering how this bracket works is not complicated. However, it is not as cut and dry as one may think. We've found a great video that helps explain the tax brackets in a very simple way.
Tax brackets and tax rates are some of the most essential information that tax payers and every citizen in the US should know in order to understand the tax they are paying and to expect the possible amount of tax they are going to pay for the next tax season. Compared to other tax systems in other countries, the US Federal government follows a progressive tax system that reflects the marginal rates. Before discussing how the tax bracketing in the US works, you should first know the 2012 Tax Brackets for this year.
Tax experts determine the brackets and rates by using the current inflation data. Since the Bush Tax Cuts, which were imposed in 2010 are extended until this year, people can expect minimal change in the tax rates and brackets especially if inflation rate is not that different from the previous rate. Tax experts will only need to adjust the brackets based on inflation and standard deductions.
According to the IRS or Internal Revenue Service, the projected Tax Brackets for 2012 will be: • 10% tax rate for married filing jointly with income bracket from $0 to $17,400, and single taxpayer and married filing separately with income bracket ranging from $0 to $8,700. Head of household will pay for this marginal rate if they have income of $0 to $12,400.
• 15% marginal tax rate for married filing jointly or qualifying widow and widower with income of $17,401 to $70,700. This tax rate also applies for single taxpayer or married filing separately with income ranging from $8,701 to $35,350, and for head of household with income from $12,401 to $47,350.
• 25% will be applied for married filing jointly and qualifying widows and widowers with income from $70,701 to $142,700. Married who will file separately will pay 25% marginal rate for income bracket from $35,351 to $71,350. For single filers, income must range from $35,351 up to $85,650, and for head of household, income must range from $47,351 to $122,300.
• 28% rate on tax will be applied for married filing jointly and qualified widowers and widows with total income ranging from $142,701 to $217,450. For single filers 28% will be applied for income reaching the amount of $85,651 up to $178,650 while married taxpayers who are filing separate tax income will pay the same tax rate for income ranging from $71,351 to $108,725. Head of households will also pay taxed with the same rate with the income from $122,301 up to $198,050.
• Married taxpayers who are filing jointly with income of $217,451 up to $388,350 will use the progressive tax rate of 33% while the same rate applies for married who are filing separately with income from $108,726 to $194,175. Single filers are applied with the same rate with income ranging from $178,651 to $388,350 and head of household taxpayers with income from $198,051 to $388,350.
• Single filers, head of households, married filing jointly, and qualifying widows or widowers will be required to pay 35% marginal tax for income bracket of $388,351 and above. The same percentage will be applied for married filing separately with income ranging from $194,176 and up.
Based on the IRS 2012 Federal Income Tax Brackets, the amount for personal and dependency exemption will increase up to $3,800 while the standard deductions for married taxpayers who are filing jointly will increase to $11,900. For single filers, the standard deductions will rise to $5,950. If you think that you are earning more this year and expect to land in a higher income bracket, you do not need to worry of paying more tax and losing more on your additional earnings because of the higher income bracket and tax rate.
One thing is for sure. Earning more does not mean losing more on tax. You will of course pay a little bit more for taxes but definitely not more than the additional amount of income you earned. Even if you go one income bracket higher, you will still pay the same rate for the specific amount you earned before and the higher rate for the remaining or the increase in your income. If you are a single taxpayer and have income below $8,700, you will pay 10% from the total income for tax. If your income increased this year to say, 9,000, this means you go up to the 2nd income bracket. This means you are still going to pay 10% tax rate for your income of $8,700, and the remaining $300 is where the 15% rate will be applied. With this tax system, taxes paid will not go more than the additional income taxpayers earned.