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Believe it or not, 2012 federal tax brackets are essentially useless in determining an accurate estimate of what your tax liability will be. This is because these tax brackets are for ordinary income tax rates; they contain lower dividend, long-term capital gains rates, and do not account for the types of income that are tax free. Note: this article discusses the 2012 tax brackets which are the tax rates for returns that are due to be filed in April/October 2013

FOR 2013 TAX BRACKET INFORMATION SEE THIS UPDATE

These tax brackets are only a rough guide, in the loosest sense of the word, and the IRS gives this same warning. The only way to calculate your tax liability is by completing your personal 1040, with all schedules, especially making sure to schedule SE for those who are self-employed or Alternative Minimum Tax (AMT) for higher income earners.

With these warnings, here are the four tax rate schedules of IRS tax brackets 2012.

Single

Taxable income over But not over Rate
$0.00 $8,700.00 10.00%
$8,700.00 $35,350.00 15.00%
$35,350.00 $85,650.00 25.00%
$85,650.00 $178,650.00 28.00%
$178,650.00 $388,350.00 33.00%
$388,350.00   35.00%

Married, Joint

Taxable income over But not over Rate
$0.00 $17,400.00 10.00%
$17,400.00 $70,700.00 15.00%
$70,700.00 $142,700.00 25.00%
$142,700.00 $217,450.00 28.00%
$217,450.00 $388,350.00 33.00%
$388,350.00   35.00%

Married, Separate

Taxable income over But not over Rate
$0.00 $8,700.00 10.00%
$8,700.00 $35,350.00 15.00%
$35,350.00 $71,350.00 25.00%
$71,350.00 $108,725.00 28.00%
$108,725.00 $194,175.00 33.00%
$194,175.00   35.00%

Head of Household

Taxable income over But not over Rate
$0.00 $12,400.00 10.00%
$12,400.00 $47,350.00 15.00%
$47,350.00 $122,300.00 25.00%
$122,300.00 $198,050.00 28.00%
$198,050.00 $388,350.00 33.00%
$388,350.00   35.00%

But IRS Tax Brackets 2012 are only a starting point to calculate tax and they do not include all of the taxes that the IRS collects. For instance, on the first $110,100.00, Social Security and Medicare taxes are assessed at a flat-tax rate.  But for income taxes, various other tax rates apply. For instance:

Tax Rates Long-Term Capital Gains and Qualifying Dividends–2012

  • For taxpayers in the 10 of 15% brackets, 0%
  • For taxpayers in higher brackets, 15%
  • Tax on un-captured Sec 1250 gain 25%
  • Capital gain rate on collectibles 28%

Also important is this years Standard Deduction for Taxpayer’s is not filing a Schedule A

  • Married Filing Joint $11,900
  • Head of Household: $8,700
  • Single Individuals: $5,590
  • Married, filing separate: $5,950

Additionally, there is a personal exemption in 2012  of $3,800 for each individual. Dependent deduction is worth no more than $950 for dependents, or $1,150 for the aged or blind.

But none of these tax brackets may end up applying. If the IRS feels a taxpayer has reduced his or her income tax too much based on total income, the IRS is allowed by law to assess an alternative minimum tax, or AMT for short. The AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold (exemption). This exemption is substantially higher than the exemption from regular income tax. Regular taxable income is adjusted for certain items computed differently for AMT, such as depreciation and medical expenses. No deduction is allowed for state income taxes or miscellaneous itemized deductions in computing AMT income. Taxpayers with incomes above the exemption rate, whose regular Federal Income Tax is below the amount of AMT, must pay the higher AMT amount.

And there are separate AMT tax brackets:

Status Single Married Joint Married Separate Trust Corporation
Tax Rate: Low 26% 26% 26% 26% 20%
Tax Rate: High 28% 28% 28% 28% 20%
High Rate Starts $175,000 $175,000 $87,500 $87,500 n/a
Exemption 2009 $46,700 $70,950 $35,475 $22,500 $40,000
Exemption 2010 $47,450 $72,450 $36,225 $22,500 $40,000
Exemption phase-out starts at $112,500 $150,000 $75,000 $75,000 $150,000
Zero 2009 exemption at $299,300 $433,800 $216,900 $165,000 $310,000
Zero 2010 exemption at $302,300 $439,800 $219,900 $165,000 $310,000
Capital gain rate 25% 25% 25% 25% 20%

As you can see, the top tax rate for AMT is 28% , yet the top tax standard tax bracket is 35%. However, because of the difference in exemptions and credits, a 28% tax rate can actually result in a higher tax than a 35% tax rate!

For more on IRS Tax Brackets 2012, visit the tax brackets category.

Did you like this article? Check out the Strangest State Tax Write-Offs.

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2 Comments
  1. We’re feel honored that to be part of Ms. Ware’s “Uncle Same Takes a Bite” iPad activity. Gainesville, Georgia is lucky to have such a teacher

    We read the assignment -terrific really- and these are the questions we’d add for class discussion:

    What causes inflation? Is inflation a type of stealth tax? Should government be able to tax capital gains? See http://www.irsmedic.com/2012/09/06/capital-gains-rate/

    What is the difference between taking someone’s money based upon how much they have (i.e. income tax) vs. theft? It is morally permissible to require, under the threat of force, anyone to hand over fair-earned money, simply because of the fact that they earned it, without regard to the government services required?

    Should it be a requirement that politicians who write the tax code understand that our tax system in not voluntary? See our friend the intrepid (or annoying, depending on viewpoint) Jan Helfeld expose the impeachable ignorance of the most powerful senators in the world. http://www.youtube.com/watch?v=R7mRSI8yWwg

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