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Official 2013 IRS Tax Brackets (Marginal Tax Brackets)
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It took until the new year but we finally have a resolution to the tax headaches created by the fiscal cliff and the results are positive for most taxpayers. Unless you earn more than $400,000 as a single filer or $450,000 as a married filing jointly, your taxes will remain the same for the near future. The Bush era tax cuts were extended for income levels under that threshold and there was a five year extension of the American Opportunity Tax Credit, Child Tax Credit, and Earned Income Tax Credit.
Below, you’ll see what the official 2013 IRS tax brackets will be as well as the “pre-fiscal cliff” predictions. I kept them just for history’s sake, I find that it’s useful to see what could’ve been as well as what actually is because it can help us understand what the future might bring.
If you’re looking for the 2012 tax brackets, that is the brackets that will be in effect when you file your taxes, you can find them at here.
2013 Official Tax Brackets
| Tax Bracket | Single | Married Filing Jointly | Head of Household |
| 10% Bracket | $0 – $8,950 | $0 – $17,900 | $0 – $12,900 |
| 15% Bracket | $8,950 – $36,250 | $17,900 – $72,500 | $12,750 – $48,600 |
| 25% Bracket | $36,250 – $87,850 | $72,500 – $146,400 | $48,600 – $125,450 |
| 28% Bracket | $87,850 – $183,250 | $146,400 – $223,050 | $125,450 – $203,150 |
| 33% Bracket | $183,250 – $400,000 | $223,050 – $450,000 | $203,150 – $400,000 |
| 39.6% Bracket | $400,000+ | $450,000+ | $400,000+ |
What ended up happening was that the current Bush Era Cuts were extended (permanently, there’s no sunset provision as there was with the Bush era tax cuts) with the threshold of $400,000 and $450,000 being where taxes would be increased. You can compare it against the Current Law scenario below to see how much taxes were cut.
Investment Tax Rates
Long term capital gain tax rate is 10% for taxpayers in the 15% tax bracket and below, 15% for those in the 25%-33% tax brackets, and 20% for those in the highest tax bracket. Long term capital gains rates and dividend rates remain tied (dividends were set to increase to ordinary income rates).
Glad to have a resolution and see that most people will not being paying higher taxes in 2013!
Three Fiscal Cliff Tax Proposals
All the experts are pointing to three possible scenarios:
- Current Law: The current law, in which Bush-Era tax cuts expire, goes into effect.
- Obama Budget: President Obama’s Fiscal Year 2013 Budget Proposal is passed.
- Bush Era Cuts: The current brackets are extended, the Bush-Era tax cuts are extended.
Under current law, the Bush-Era tax cuts are set to expire and we go to the tax brackets we knew back in the Clinton Administration. Of the three, those rates are the highest for all filers. Alternatively, we have the Bush-Era tax cuts extended, in which there is a benefit to everyone. Lastly, we have the Obama Administration’s FY2013 proposal that would increase rates on the highest income earners.
Three Scenario Tax Brackets
Here are the tax brackets under the Current Law scenario:
| Tax Bracket | Single | Married Filing Jointly | Head of Household |
| 15% Bracket | $0 – $35,500 | $0 – $59,300 | $0 – $47,600 |
| 28% Bracket | $35,500 – $86,00 | $59,300 – $143,350 | $47,600 – $122,860 |
| 31% Bracket | $86,000 – $179,400 | $143,350 – $218,450 | $122,840 – $198,900 |
| 36% Bracket | $179,400 – $390,050 | $218,450 – $390,050 | $198,900 – $390,050 |
| 39.6% Bracket | $390,050+ | $390,050+ | $390,050+ |
And the brackets under the Obama FY2013 Budget:
| Tax Bracket | Single | Married Filing Jointly | Head of Household |
| 10% Bracket | $0 – $8,750 | $0 – $17,500 | $0 – $12,500 |
| 15% Bracket | $8,750 – $35,500 | $17,500 – $71,000 | $12,500 – $47,600 |
| 25% Bracket | $35,500 – $86,000 | $71,000 – $143,350 | $47,600 – $122,850 |
| 28% Bracket | $86,000 – $179,400 | $143,350 – $218,450 | $122,850 – $198,900 |
| 33% Bracket | $179,400 – $199,350 | $218,450 – $241,900 | $198,900 – $222,750 |
| 36% Bracket | $199,350 – $390,050 | $241,900 – $390,050 | $222,750 – $390,050 |
| 39.6% Bracket | $390,050+ | $390,050+ | $390,050+ |
Finally, here’s what they’d look like if the Bush Era cuts are extended as is:
| Tax Bracket | Single | Married Filing Jointly | Head of Household |
| 10% Bracket | $0 – $8,750 | $0 – $17,500 | $0 – $12,500 |
| 15% Bracket | $8,750 – $35,500 | $17,500 – $71,000 | $12,500 – $47,600 |
| 25% Bracket | $35,500 – $86,000 | $71,000 – $143,350 | $47,600 – $122,850 |
| 28% Bracket | $86,000 – $179,400 | $143,350 – $218,450 | $122,850 – $198,900 |
| 33% Bracket | $179,400 – $390,050 | $218,450 – $390,050 | $198,900 – $390,050 |
| 35% Bracket | $390,050+ | $390,050+ | $390,050+ |
How do all the other various deductions and exemptions change? Here is the standard deduction under each scenario:
| Filing Status | Current Law | Obama Budget | Bush Cuts Ext. |
| Single | $5,950 | $5,950 | $5,950 |
| Married Filing Jointly | $9,950 | $11,900 | $11,900 |
| Head of Household | $8,750 | $8,750 | $8,750 |
The personal exemption remains $3,800 under all scenarios.
The brackets are slightly higher compared to last year, to account for inflation, but aren’t much of an increase. The brackets themselves have not changed though they may at the end of this year since the Bush tax cuts are expiring, after a two year extension.
Capital Gains Rates
Here’s another part of the tax rates that is subject to what Congress and the President decide. Right now, if current law were to remain, the long term capital gain tax rate would be 10% for taxpayers in the 15% tax bracket and below and it would rise to 20% for those in higher brackets.
President Obama proposed to only raise long term capital gains rates on high income tax brackets, which start at $241,900 for couples, $199,350 for single filers, and $222,750 for heads of household (and these values would be indexed to inflation).
IRA & 401(k) Contribution Limits
Not exactly related to tax brackets but I wanted to throw in there that the contribution limits for your 401(k) and IRA have increased as well. For 2013, you can now contribute up to $17,500 to your 401(k) and $5,500 to your IRAs.
Many Other Provisions
The tax brackets might speak to how your marginal income will be taxed but the reality is that so many deductions, credits, and other tax items are set to expire this year. The Tax Policy Center has a great recap of it all, including big items such as the payroll tax credit and the American Opportunity tax credit. Many of these can have a big impact on what happens to your tax liability.
(Photo: kozumel)
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Jim,
Correct me if I’m wrong, but is the difference between Obama’s FY2013 and the Bush Era tax cuts just a higher tax bracket for the highest income? Thanks.
-Christian L. @ Smart Military Money
You are correct, that’s the proposed difference.
Seeing as how Obama has not had a single of his budgets passed during his time as President, I’m not sure that “experts” are really considering that option.
As I see it, the most likely scenario is the current law — that is, taxes go up bigtime for everyone on January 1. This is what will certainly happen if Obama wins reelection. This might also happen if Romney wins the presidency but Democrats maintain control of the Senate.
The next most likely scenario is a continuation of the Bush tax cuts, or something similar. This is likely if Romney is elected and he finds himself with a cooperative Congress.
I bet you feel like an idiot now don’t you? Obama stayed and he kept our tax cuts. Now if your Romney was elected………
I bet you feel like an idiot know dont you. Did you notice you taxes went up even though you don’t make anywhere near 450,000 a year. I did.
What are the current and 2013 payroll tax rates and limits?
With the Bush policy ending what does that do for someone like me? I am married with a salary of $100k and own an investment property I am trying to unload where I stand to make a $150k profit. Does the new long term capital gain tax apply to me as well as the new medicare tax? Tony
FYI, I found a calculator that lets you predict what the fiscal cliff tax rates will do to your net pay…
http://www.yourmoneypage.com/campaign2012/c2012_fedwh1.php
What a “Crock” of “S” all of this is! I say let all of the Billionaires & Trillionaires pay for all of this stuff since they all “came out like bandits” with the Subprime Mortages and Financial Crash unlike the rest of us “regular” folks!
It doesn’t work like that. Taxing the rich more only makes it harder on us “regular folks” I support a family of 3 on less than 45,000 a year with out state or federal funded health care or other government handouts. When you tax the rich they only pass the increased expenses to us. They have a right to be rich and they got rich because they worked hard at it and took risks. they are the ones that create jobs and make the economy go around. When your regulate them and restrict them more and more the lower pay and benefits and raise prices. The answer is get the government out of it.
Mr or Ms Anonymous are not a “regular folk.” A “regular folk” would not condone big business to continue to get big at the expense of the “regular folk.” Greed has ruined this country and has almost eliminated the middle class; you are either poor or rich. Why do you think so many jobs have left the US? I’ll tell you why; big business is all about “greed” and they don’t give a hoot about the “regular American folk.” If they did, jobs would never leave this country for cheap labor.
Nostalgia,
you are so wrong and probably know little about finances. It is not big business that sent jobs oversees, it is big government and all of the taxes and regulations that forced businesses to go over sees
MR. Nostalgia
Government has made it impossible to MFG in the US because of endless regulation. I would prefer to mfg here but it is cost prohibitive. Get government out of the way and see what happens. Keep doing the same thing and it will get worse. Big business is not the problem Gov’t is. They (Clinton) forced banks to lower there lending standards and that is were this whole economic nightmare started. Blame Clinton, Dodd & Frank!!!!! People that can’t afford homes should not have the rules changed for them so they can. Obama is trying again to make homes affordable for people that don’t qualifiy and we will see the same problem again. Thanks for Voting for Stupidity!!!!!
Amen, Anonymous … Amen. The class warfare, race warfare, gender warfare, faith warfare, and any other kind of divisive tactics this bunch in DC can dream up are tearing us to shreds. It’s nearly impossible to have any honest discussion on our pressing issues b/c the gov’t with the treason media’s assistance is spreading propaganda and outright lies to people who don’t understand enough to know they’re being deceived so the gov’t can further erode our constitutional freedom. It’s divide & conquer, Saul Alinsky style … just evil.
I think Ron is saying your current law rates are inaccurate.
The real crock is the fact that any of this exists like this at all. I personally think that in order for the tax rate to be fair for everyone there should only be one rate and it should not be any more than 10 percent. Keep in mind that would also require that everyone actually pay 10 percent of their taxable income. I am so sick and tired of everyone thinking that the super rich be taxed at such a high rate. That is complete bull. bottom line if you want to improve your financial status, get off your duff and put the work in. The current tax schedule actually offers no benifit to me to work more hours to bring in more money to pay down my student loans… I am a Registered Nurse with a Bachelor of Science in Nursing. I am Single and want to be able knock out my student loan debt really fast. I work a lot of overtime it will put me into a higher tax bracket and I will actually bring home less money than if I did not work as much and made less money… that is just really really stupid… I have absolutely no faith in president obama or our congress at pairing back the government as a whole so that a balanced budget could be achieved with the 10 percent rate.
Michael – You are misunderstanding the tax brackets. You will only pay the higher rate on the income that falls withing that higher bracket… For instance if your AGI is $36,000 under the “current law” scenario you would only pay 28% on the last $500 of income, and you would still only pay 15% on the first $35,500
Michael,
Have you checked into the Public Service Loan Forgiveness program for Student Loans?
http://www.studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service#what-is-the-public
My daughter found out her job qualified.
Slacker. She borrowed the money, she should pay it back.
It’s interesting to note that the tax increase for the wealthy would amount to about 3%, but look at a married couple with income in the range of 60-71k, their increase is 13%!
Yeah Don, how pathetic! If your daughter borrowed money to go to school, she should pay it back and not be looking for forgiveness. But hey, if you’re okay with that too, then we know where she learned her pathetic ways!
Those of you who say that people should not be able to claim the public service forgiveness on their student loans obviously have no clue what you are talking about.
First of all these “public servants” are your public school teachers, nurses, police force, firefighters, ect. most of whom make peanuts for what they do. The cost of their education is usually much higher than their gross income.
Second of all, under the public service forgiveness, these people still have to make 5 to 10 years of on-time payments to qualify for forgiveness. This means they still are paying for a portion of the loan.
My last thought on this is: these people do a great service for our community. Without them our children would be uneducated, crime would run rampant in the streets, and nobody would be there to extinguish the fire should your house ever be so unlucky. This government forgiveness of student loans to these people is no different than a private employer offering reimbursement for coursework related to the job. These people who perform these services deserve at least that much courtesy. //end rant// To those of you out there who perform these services that I mentioned and so many more that I didn’t (like our military personnel) I want to thank you for all that you do. At least some of us appreciate what you do for our communities and our country. //edited//
Its worth it to shoot for an $87,000 salary this year if you make more than 36000. Its just a 3% increase as opposed to those who are getting hit with a 10% increase once they get 36k.