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  • 2013 Tax rates

  • 2013 Tax rates

    • One scenario is that the Bush era 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 still 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.


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