Last year around this time we were right in the middle of a contentious debate in Congress about whether or not they would be extending the Bush era tax cuts, and whether or not the Obama administration would sign them into law, essentially making them his own.
In the end, despite not really wanting to Obama did sign them into law because Republicans gave in a few other areas that he and the Democrats were pushing for. Here are some of the things that happened as a result of H.R.4853 last year:
- Bush tax cuts extended for 2 years (2011-2012).
- Social Security tax on employee wages dropped from 6.2% to 4.2% for one year (2011).
- Estate tax was reinstated at 35%
- Jobless benefits extended.
- Tax rates on capital gains and dividends extended for 2 years, even for higher earners.
So there was a lot of discussion in Congress around the tax related issues last year. This year probably won’t see as much debate just for the simple fact that many of the tax rates/etc were continued through tax year 2012, so won’t be coming due this year.
2012 Federal Tax Rate Projections
Since the marginal tax rates probably won’t be changing much due to new legislation in Congress this year, we most likely won’t be seeing any major changes to the tax rates. The official IRS tax rates for the 2012 tax year haven’t been released yet, but several tax related groups have now released their projections of what the rates will most likely be. They are using calculations created by the IRS to figure these things out – which take into account inflation, consumer price index and other things. I’m just glad we don’t have to figure it out on our own.
The rates haven’t changed much this year from last. The most we’ll probably be seeing are some slight changes in the bracket ranges due to inflation.
| 2012 Tax Brackets | Single | Married Filing Jointly |
|---|---|---|
| 10% Bracket | $0 – $8,700 | $0 – $17,400 |
| 15% Bracket | $8,701 – $35,350 | $17,401 – $70,700 |
| 25% Bracket | $35,351 – $85,650 | $70,701 – $142,700 |
| 28% Bracket | $85,651 – $178,650 | $142,701 – $217,450 |
| 33% Bracket | $178,651 – $388,350 | $217,451 – $388,350 |
| 35% Bracket | $388,350+ | $388,350+ |
If you compare to the tax rates we have for 2011, we’re only seeing some slight variations in the bracket ranges.
| 2011 Tax Brackets | Single | Married Filing Jointly |
|---|---|---|
| 10% Bracket | $0 – $8,500 | $0 – $17,000 |
| 15% Bracket | $8,500 – $34,500 | $17,000 – $69,000 |
| 25% Bracket | $34,500 – $83,600 | $69,000 – $139,500 |
| 28% Bracket | $83,600 – $174,400 | $139,500 – $212,300 |
| 33% Bracket | $174,400 – $379,150 | $212,300 – $379,150 |
| 35% Bracket | $379,150+ | $379,150+ |
If you want to check out what the rate ranges have been in past years (besides 2011) to compare, here are our posts for past years.
What Is Changing For 2012 Tax Year?
So what are the main things that are changing for this coming tax year?
- The standard deduction for married filing jointly is projected to rise to $11,900 in 2012 from $11,600 in 2011.
- The standard deduction for singles will rise to $5,950 in 2012 from $5,800 in 2011.
- Personal exemption rises to $3,800 in 2012 from $3,700 in 2011.
- Tax-bracket rate thresholds increase for each filing status. (Example: For a married couple filing a joint return the taxable-income threshold separating the 28-percent bracket from the 33-percent bracket is $217,450, up from $212,300 in 2011. (see chart above for other range changes)
Don’t forget to be organized for tax season, figure out what you’ll need to file, and take all the income tax deductions that are available to you.
Thanks for the heads up!
Peter,
Have you considered to write about Herman Cain’s 9 9 9 tax plan?
Brad
I haven’t, but to be honest, more because I don’t know a ton about it at this point. I have some inkling that it deals with moving towards a sales tax model vs. income tax? Does that sound right? Consumption tax versus an income tax?
This is a great piece of information. I still think we pay too much taxes… :(