Tax Rates for the 2012 Tax Year

Tax Rates for the 2012 Tax Year
Federal income tax brackets for 2012

2012 Tax Rates
The year 2012 could be the last year for America’s current tax rate structure. Six tax rates, ranging from 10% to 35%, have been in place since 2003. The Tax Relief Act of 2010 temporarily extended the current tax rate structure through the end of 2012. Tax rates will revert automatically to their pre-2003 levels unless new legislation is passed.

For 2012, there will be six tax rates of:

* 10%,
* 15%,
* 25%,
* 28%,
* 33%, and
* 35%.

The tax rates for 2013 are scheduled to change as follows: the 10% rate will be collapsed into the 15% rate; the 25% rate will become 28%; the 28% rate will become 31%; the 33% rate will become 36%; and the 35% rate will become 39.6%. These tax rate changes will take effect beginning in 2013 absent further legislation.

Capital gain income might be taxed at different rates. There are special capital gains tax rates that apply for dividends, long-term investments, collectibles, and certain types of real estate.

Note: These tax rate schedules are provided for tax planning purposes. To compute your actual income tax, please see the 2012 instructions for Form 1040 and the 2012 Tax Tables.

Each tax rate applies to a range of income, which is called a tax bracket. Each tax rate applies to a specific range of taxable income, which is income after various deductions have been subtracted.
Single Filing Status
[Tax Rate Schedule X, Internal Revenue Code section 1(c)]

* 10% on taxable income from $0 to $8,700, plus
* 15% on taxable income over $8,700 to $35,350, plus
* 25% on taxable income over $35,350 to $85,650, plus
* 28% on taxable income over $85,650 to $178,650, plus
* 33% on taxable income over $178,650 to $388,350, plus
* 35% on taxable income over $388,350.
Married taxpayers can choose between filing a joint tax return or a separate tax return. The Married Filing Jointly filing status provides more tax benefits than filing separate returns, but taxpayers will need to weigh the pros and cons and decide for themselves which is the best filing status.

If you are married, then you and your spouse can filing a joint tax return. You are considered married if you are legally married on the last day of the year. In order to file jointly, both you and your spouse must agree to file a joint tax return, and both must sign the return. Married Filing Jointly (MFJ) provides more tax benefits than filing a separate return.

The IRS advises that, “If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses” (from Publication 501, “Married Filing Jointly”).

What’s a Joint Tax Return?
By filing a joint tax return, both spouses report all their income, deductions, and credits. Both spouses must sign the return, and both spouses accept full responsibility for the accuracy and completeness of the information reported on the tax return.

The IRS cautions, “Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse” (from Publication 501). The IRS may grant relief from joint liability for taxes through innocent spouse relief, separation of liability, or equitable relief. Refer to Publication 971 (Innocent Spouse Relief) for additional information about these tax relief programs.

Deceased Spouse
If your spouse died during the year, you can still file a joint return for that year. In the following years, you can file as a surviving spouse, as head of household, or as a single taxpayer. The IRS explains, “If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status” (from Publication 501).

Filing Joint versus Separate Returns
Filing a separate return provides relief from joint liability for taxes. However, married taxpayers who file separately are not eligible for many tax deductions and credits, and have higher tax rates. In general, it is more advantageous to file a joint return.

Domestic Partners Cannot File Joint Returns
The IRS does not follow state law for recognizing same-sex marriages. The Federal Defense of Marriage Act of 1996 defined marriage as “a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.”

Some states, such as California, are requiring domestic partners to file tax returns as if they were married. Domestic partners should consult with an experienced tax professional for advice on filing their federal and state tax returns.

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