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2013 tax rates, income brackets

By Kay Bell · Bankrate.com
Tuesday, January 15, 2013
Posted: 4 pm ET

The one good thing about having to wait until Jan. 30 for the Internal Revenue Service to accept our 2012 tax returns is that we can explore some of 2013's tax changes.

For most of us there aren't a lot. The major accomplishment of the American Taxpayer Relief Act, aside from keeping the country (and us!) from falling off the "fiscal cliff," was that it made permanent most of the tax laws we've become used to following for the last 12 years.

What does this mean for me?

I know, permanence doesn't mean the same thing to Congress as it does to you, me and dictionary editors. Officially, it simply means that we don't have to worry about tax breaks like the $1,000 amount of the child tax credit expiring at a preset date.

Of course, the biggie from this latest tax bill is that it keeps the lower tax rates first enacted under the George W. Bush administration in place, aka, permanent.

And it tacks on a new top rate for wealthier folks.

But deciding what our 2013 and future taxes would look like was just one part of the process. We had to wait for the Internal Revenue Service to figure out, based on inflation, just how much of our earnings fall into these now permanent tax brackets.

Tah-dah! We now know.

The IRS has released the remainder of the 2013 inflation adjustments, including this year's tax rates and income brackets. Bankrate has published the complete information in a spanking new 2013 tax rates table.

2013 tax rates

Tax rate Single filers Married filing jointly or qualifying widow/widower Married filing separately Head of household
10% Up to $8,925 Up to $17,850 Up to $8,925 Up to $12,750
15% $8,926 - $36,250 $17,851 - $72,500 $8,926- $36,250 $12,751 - $48,600
25% $36,251 - $87,850 $72,501 - $146,400 $36,251 - $73,200 $48,601 - $125,450
28% $87,851 - $183,250 $146,401 - $223,050 $73,201 - $111,525 $125,451 - $203,150
33% $183,251 - $398,350 $223,051 - $398,350 $111,526 - $199,175 $203,151 - $398,350
35% $398,351 - $400,000 $398,351 - $450,000 $199,176 - $225,000 $398,351 - $425,000
39.6% $400,001 or more $450,001 or more $225,001 or more $425,001 or more

What to expect under the new brackets

The first $8,925 of your income is taxed at 10 percent if you're a single taxpayer. A head-of-household sees $12,750 of his income taxed at this lowest rate. Married couples filing a joint return have $17,850 of their income taxed at 10 percent. If the tax bill hadn't made this Bush-era rate permanent, all this money would have been taxed at 15 percent, so there's a 5 percentage point savings.

On the much publicized other end of the scale, which we all hope to one day reach even though we'll complain about the taxes then, single taxpayers will pay a tax rate of 39.6 percent if they make more than $400,000. That top tax rate kicks in for a head-of-household at $425,000 and a jointly filing couple at $450,000.

Now here comes the fun part of the 2013 tax table.

If you're tax geeky like me (and aren't you, since you're reading this blog?), you'll also notice that the 35 percent income bracket is tiny for single taxpayers. Only about $1,650 is covered in this filing status' tax bracket -- earnings from $398,351 to $400,000.

The spread is larger for head-of-household and married joint filers. Single taxpayers claiming dependents will see $26,650 of their earnings taxed at 35 percent. The penultimate tax rate will apply to $51,650 of a married couple's income.

But that $1,650 amount could be a problem one day. Depending on inflation, a single filer could soon see his or her income tax rate jump from 33 percent to the top 39.6 percent rate.

This is one of those frequent unintended consequences of hurried tax legislation. Don't be surprised if Congress soon revisits the rate structure and we have another big Capitol Hill fight over what to do about the incredibly shrinking 35 percent income tax bracket.

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29 Comments
KoreanSlothLover
February 05, 2013 at 7:02 pm

pjmcn, ofc you do not see the problem with it. That is because the tax scale is weighted so that the higher earners pay more than their fair share in taxes. The average millionaire will pay more than you do in taxes in one year that you would pay in your whole life (barring winning the lottery etc...) so how exactly is that fair at all to anyone? You are the typical example of a taker, one who wants others to provide for them. Either it is education for your children, roads for you to drive, or food stamps for your pantry. You sir make about 1.5x what I did last year after I was laid off, yet do I say how much of a problem it is that you have to pay more in taxes than I do. Everyone should pay the same amount (in percentage) based off of their income. Even someone like me who lives in poverty right now. THAT is the ONLY way that you can ever say that people 'pay their fair share'.

TINA
February 05, 2013 at 2:37 pm

I WANNA FIND OUT HOW MUCH OF A DIFFERENCE THERE WOULD BE UN THE WITH HOLDINGS IF I CLAIM SINGLE 5 OPPSED TO SINGLE 1. DOES ANYONE KNOW HOW TO FIGURE THAT ONE OUT? ALSO WHEN I WORK OVERTIME MY CHECK IS TAXED HIGHER, I GET THAT BUT WHAT SHOULD THE OVERTIME CUT OFF BE IN ORDER TO SEE A FAT CHECK. I NEED TO SEE THE TAX BRACKETS, AT WHAT AMOUNT AM I IN THE NEXT BRACKET? 3
TEETEE

DT
February 05, 2013 at 9:27 am

jc - Well said! Some of these people think the evil rich just woke up one day and won life's lottery. For every Paris Hilton, there are thousands of people who sacrificed and put in the long days, and who are now reaping the fruits of their labor. Fair share, indeed.

sanderdog
January 31, 2013 at 8:07 pm

Big probelm is that most people do not do their own taxes. They fail to understand how the tables work. Just because your top rate is say 35% and Buffets is 15% does not mean you pay more after deductions. In my own case, married, no kids, mortgage, 100k income. Effective rate is 12% total after deductions. My top rate may be 28% but I am not paying it on every dollar. It is true that I am paying 28% on the proceeds from my IRA, which is taxed as ordinary income. But, the IRA was not taxed when saved. Seems fair to me. The progressive rate of tax tables mean that for every dollar I earn at the margin I am paying at least 34% to Feds and State. How much is enough is really a hard question that tax and spenders cannot or will not answer.

jc
January 30, 2013 at 11:38 pm

pjmen--"I don't begrudge them that, but isn't that enough?"
spoken like a true democrat. What sacrifices did they make, do they make to enjoy that kind of income? I'm sure you don't know. But I do, and it is tiresome to hear that we make "enough" and we should certainly be willing to "pay our fair share" Well, "FAIR" would be exactly the same percentage. But that's not our tax code is it? My problem with all of this, and I make no judgement about you personally--I don't know you or your situation, but there are too many able bodied people collecting government subsidies and not even trying to work. There are also people who did not make the sacrifices necessary to put themselves into the position to make a higher income and later on in life they feel as if those of us that did make sacrifices owe them something because we make so much, almost as if we are equals, we just had the good fortune to earn more. It all comes down to you reap what you sow, and because your neighbor sweated and planted his crops, and you weren't as serious, he doesn't owe you some of the harvest simply because he has more.

Gracie Smith-White
January 16, 2013 at 7:32 pm

I have a question concerning state tax and mva. I tried to register my vehicle and was told that I have state tax lien on my record. I would have to make a payment to State of $4000, I had to pay off camera ticket, plus administrative. I am a Veteran I need my vehicle to get back and forth to work. Please tell me how this is connected. I hired JK Harris 5 years ago to take care of taxes, they filed a Chapter 13 and now I am lost. I can't get to my doctors appointments and therpy.

pjmcn
January 16, 2013 at 2:35 am

You're right jtc. I totally messed up the figures in my head. The grey matter isn't as capable as it once was. However, looking at your figures,the 35% payer still ends up with a net income 8 times what someone in my situation does. I don't begrudge them that,but isn't that enough?

UrCrazy
January 15, 2013 at 11:17 pm

@todd, yes you can actually blame Bush for a very long time. There were two wars not paid for, a prescription drug program not paid for, and the biggest of all, giving tax breaks to all the wealthy people that wanted it. We borrowed money for all of that and are paying interest on it. Go look at a graphic representation of what these things will cost going to 2030 with the interest over time. So your the type that thinks putting $50k on a credit card at 30% is no big deal and you keep spending. You can't blame yourself for it eight years later right? Well the interest on all those big ticket items is huge in the outlying years, so yes you actually can blame Bush. Then you can blame Obama for all the money he approved from the Republicans and Democrats under his watch. If you want to really blame someone, blame the congress.

jtc
January 15, 2013 at 10:56 pm

pjmen, your math is very fuzzy indeed. Someone who is in the 35% tax bracket, may make 10 times what you do, but they don't pay just "a little more than 2 times the taxes" that you do. For example, in 2012, for a taxable income of $400,000, the federal tax would be $109,140. Compare that to the $5,130 paid by a taxable income of $40,000. So the issue really is that someone who makes 10 times what you do actually pays more than 21 times the taxes you do!!

pjmcn
January 15, 2013 at 10:13 pm

To DDK and Kay, i think yoy misread. The lowest rate doesn't increase from 10% to 15%, it stays at 10% because of the new tax bill. It would have automatically jumped otherwise. And as for you folks who are complaining about 35%, you make 10 times what I make and only have to pay a little more than 2 times the taxes! I don't see the problem!