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Sneak Peak at Projected 2012 Tax Brackets

At around this time each year, various institutions will make a stab at next year’s tax brackets. The cycle was a little broken last year as Congress and the President waited until much later in the tax year to decide on the Bush era tax cuts (they were extended for two years). While there are a few unsettled issues this year, there aren’t any that affect the base tax brackets themselves so this fun little exercise is probably going to be accurate for next year.

The tax brackets have been made official, here are the official IRS tax brackets [3].

The Tax Foundation took a look [4] the Consumer Price Index for urban consumers (CPI-U) and used it to adjust the tax brackets, standard deduction, and personal exemption to give us a good look at how our brackets will look next year.

CPI-U & Calculating Brackets

According to the Bureau of Labor Statistics, inflation from Sept 2010 through August 2011 was 2.43% – that what will be used to calculate the new tax brackets. As the Tax Foundation put it, the IRS uses a “somewhat complicated formula” that isn’t that complicated. In essence, the figure out how much CPI-U has grown from the base year and adjust the value accordingly, rounding down to the nearest $50. (it’s only complicated because 2012 taxes are calculated based on Sept 2010 to Aug 2011 inflation figures… because they need time to print the forms and instructions!)

So if we know this is what they’re doing, why are these “projected” figures? The BLS can revise the August 2011 figure in October 2011, but that adjustment is most likely not going to be large enough to affect these rates (since numbers are rounded down to the closest $50). However, they could change depending on the revision.

2012 Projected Tax Brackets

Here are the projected 2012 tax tables (here are the 2011 tax brackets [3] for comparison):

Tax Bracket Single Married Filing Jointly Head of Household
10% Bracket $0 – $8,700 $0 – $17,400 $0 – $12,400
15% Bracket $8,700 – $35,500 $17,400 – $70,700 $12,400 – $47,350
25% Bracket $35,500 – $85,650 $70,700 – $142,700 $47,350 – $122,300
28% Bracket $85,650 – $178,650 $142,700 – $217,450 $122,300 – $198,050
33% Bracket $178,650 – $388,350 $217,450 – $388,350 $198,050 – $388,350
35% Bracket $388,350+ $388,350+ $388,350+

Tax Preparation Packages

Company Package Price Notes

Intuit [5]
TurboTax Deluxe $49.95

Free for 1040EZ &low income, Deluxe imports last year’s return, full Form 1040 filing. Free e-file.

More [5]

2nd Story Software [6]
TurboAct Deluxe $9.95

Free for 1040EZ & low income, Deluxe + State for $17.95, Deluxe includes all IRS forms. Free e-file.

More [6]

H & R Block [7]
Deluxe $49.95

Free for 1040EZ & low income, Deluxe for homeowners & investors, Free e-file.

More [7]

Petz Enterprises [8]
TurboBrain Deluxe $39.95

1040EZ for $14.95, 1040 Deluxe for $39.95, Tax Expert available at $129.95.

More [8]

Other Notable IRS Tax Numbers

The standard deduction will increase for everyone as well:

So, plan your tax moves accordingly.

(Photo: davedugdale [9] of www.learningDSLRVideo.com [10])