2012 Federal Income Tax Brackets

by Michael on Nov 29, 2012

Photo of 1040 Tax Form with a Pen and Calculator

While 2013 income tax rates are currently shrouded in mystery, the situation for 2012 has been set in stone for quite some time.

Before I list the relevant details, however, I just wanted to take a moment to remind you exactly how tax brackets work…

In our progressive tax system, the stated rates are marginal rates. That is, they only apply to the dollars in that particular bin, not to your total taxable income.

Thus, if you’re a single filer, your first $8,700 will be taxed at 10%, your next $26,650 will be taxed at 15%, and so on. The end result is an effective tax rate that is typically a good bit lower than your marginal rate.

As a result, moving to a higher tax bracket isn’t the income-decimating occurrence that some people think it is. If you slip across the line separating the 15% and 25% tax brackets, only the dollars above that mark will be taxed at the higher rate. Everything else will be taxed at 10% or 15%, as spelled out above.

In other words, moving to a higher tax bracket won’t cost you more money. It just makes those extra dollars that you’re earning worth a bit less.

And now, back to the topic at hand… The current tax brackets are as follows:

 Tax Bracket  Single Filers  Married Filing Jointly
10% Bracket $0 to $8,700 $0 to $17,400
15% Bracket $8,700 to $35,350 $17,400 to $70,700
25% Bracket $35,350 to $85,650 $70,700 to $142,700
28% Bracket $85,650 to $178,650 $142,700 to $217,450
33% Bracket $178,650 to $388,350 $217,450 to $388,350
35% Bracket $388,350+ $388,350+

Some other IRS tidbits:

  • The personal exemption stands at $3,800.
  • The standard deduction is $5,950 for single filers.
  • The standard deduction is $11,900 for married filing jointly.
  • The gift tax exclusion is $13,000 per giver/recipient.

As for retirement contribution limits, I’ve covered 401(k)/403(b)/457(b) limits as well as traditional/Roth IRA limits in the recent past.

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