The 2013 marginal tax rates have been set. Elections and inflation played their part before a settlement was agreed upon on the newly adjusted tax brackets for 2013. If you are filing the year 2013 for the fiscal year of 2012 income, then you should view the 2012 tax brackets.
Although the video above is referring to historical information (this CPA mentions 2008), the information and the base foundation of how you calculate your tax brackets is fantastic. She explains what your marginal tax rate is, as well as gives a basic example of how this is calculates. These are the the fundamentals you can use to determine your tax bracket for any year.
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Unless Congress acts to further continue the Bush-era tax cuts, 2012 will be the final year, leaving many to wonder where they will fall in the 2013 shakeup. Originally set to expire in the year 2011, the Obama Administration extended the cuts through 2012. Inflation shows historically that everything will move slightly. However, the election and the next President of these United States will also play a vital role in the upcoming 2013 tax rates. If our Congress denies to extend the Bush-era tax cuts, we will see an undoubted change in rates as well as other substantive changes take effect. The brackets will have a new look. We will update this information as soon as we can.
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There are actually a lot of speculations and projected scenarios on what will happen to the tax brackets and the changes it may undergo in case of changes in the legislation. With the election coming in, there is no definite tax rates that can be expected since the President that will be elected in the coming election will have great influence on the kind of tax system will be applied especially with the expiration of the tax cuts imposed during the Bush era. According to tax experts, there are 3 scenarios that can occur and will determine the income brackets and tax rates for 2013. • One scenario is that the Bush ear tax cuts would be again extended which means the current tax rates would still be in effect and the income brackets will only be adjusted for inflation.
• Second scenario is that the tax cuts would finally expire and the previous tax system before the tax cut was imposed will take effect. This means that the tax rates will automatically revert to its original values or levels before the 2003 tax cuts.
• The third scenario is that the tax cuts will expire but only for high-income brackets and the new tax rates proposed by President Obama will take effect.
Each scenario will have different effects on the overall determination of income brackets and the tax rates. To understand each scenario, here is a simple data and comparison:
First Scenario: Tax Cuts Extended If the tax cuts applied in 2003 will be extended again, the tax rates will be the same. These rates are 10%, 15%, 25%, 28%, 33%, and 35%. The projected income brackets as adjusted for inflation will be a little bit higher compared from the previous income range. With this scenario, little change can be expected and taxpayers will still enjoy lower tax rates.
Second Scenario: Tax Cuts Expiration If the tax cuts will not be extended until 2013 tax year, there is a possibility that the previous tax rates will be applied. This means that the tax rates revert to 15%, 28%, 31%, 36%, and 39.60%. The income brackets for single filers will be ($0 to $36,250), ($36,251 to $87,850), ($87,851 to $183,250), ($183,251 to $398,350), and $398,351 or more.
Tax brackets for married filing jointly with no tax cuts in 2013 will be ($0 - $60,550), ($60,551 - $146,400), ($146,401 - $223,050), ($223,051 - $398,350), and $398,351 or more. For head of households, tax brackets will be ($0 - $48,600), ($48,601 - $125,450), ($125,451 - $203,150), ($203,151 - $398,350), and $398,351 or more.
Third Scenario: Tax Cuts Expired for High Income This tax system will make great changes in tax rates especially for high income brackets. If the tax cuts expired for high income only, there will already be a total of 7 tax rates and income brackets for each filing category in 2013. These marginal tax rates will be 10%, 15%, 25%, 28%, 33%, 36%, and 39.60%. The tax brackets for each filing status will be the same for the scenario 1 or when tax cuts are applied but only until the 4th level or the 28% tax rate. Income brackets will change starting from 33% to 39.60% tax brackets.
No matter what income levels or tax rates will be used, taxpayers will stay pay taxes for specific income levels and not the rate for the overall income. Since these scenarios are only hypothetical, there may still be a little difference to the actual brackets that will be applied depending on the inflation rate for that year. Since the Congress are still in discussion and debate on the right tax brackets and rates to use for 2013, people can only expect and speculate especially if there will be some major unexpected event that will occur in the incoming US presidential elections.