Good news for all tax payers!! The tax rates and income brackets for 2013 has been revised and published by the Internal Revenue Services (IRS). Thus, we all can now explore the 2013 tax changes while paying our taxes for 2012. Well, one of the important achievements of the American Taxpayer Relief Act, besides helping everyone to avoid the "fiscal cliff," was that it made permanent most of the tax laws which we were there for the last 12 years. Thus, certain taxes like child tax credit, Mortgage Forgiveness Debt Relief Act, etc. won’t get expired in the present times. Apart from this, wealthier folks have now been placed into a higher tax bracket.
The 2013 inflation adjustments (tax rates and income brackets)…
You can check out the given table in order to know the new 2013 inflation adjustments which include the tax rates as well as the income brackets:
Analysis of the new tax bracket...
Let’s analyze how these new tax adjustments will work. If you are a single tax payer, then the first $8,925 of your income is taxed at 10% whereas a head-of-household sees $12,750 of his income taxed at this lowest rate. In case of married couples, who file a joint return, have $17,850 of their income taxed at 10%. If this wouldn’t have been the case, then all the money would have been taxed at 15%. Thus, there is a savings of 5 percentage points.
There is a fun part as well in 2013 tax table. You will find that the 35% income bracket is a very small one for single taxpayers. This tax bracket only covers for about $1,650 - earnings from $398,351 to $400,000. But again, the tax bracket is greater for head-of-household and married joint filers. Single taxpayers claiming dependents will see $26,650 of their earnings taxed at 35% but the second last tax rate will apply to $51,650 of a married couple's income.
Consequences of the hurried tax legislation…
Many believe that the $1,650 amount could be a problem one day. Keeping in mind the inflation, a single filer may soon see his/her income tax rate rising from 33% to the top 39.6% rate. It won’t be a surprise if Congress revisits the rate structure soon and we have another big Capitol Hill fight on how to manage the exceptionally shrinking 35% income tax bracket.