Code Section 1
| Code Section | Effective Date | Name of Act | Name of Provision | 10yr Revenue Estimate ($millions) |
|---|---|---|---|---|
| 1, 55 | 12/31/2012 | The American Taxpayer Relief Act of 2012 | Permanent Extension of 2003 Tax Relief; 20-Percent Capital Gains Rate for Certain High Income Individuals | -289,920 |
| 1, 32, 63 | 12/31/2012 | The American Taxpayer Relief Act of 2012 | Marriage penalty relief and earned income tax credit simplification | -84,630 |
| 1 | 12/31/2012 | The American Taxpayer Relief Act of 2012 | Individual income tax rate reductions | -762,352 |
| 1 | 12/31/2010 | The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 | Marginal Individual Income Tax Rate Reductions | -186,775 |
| 1, 32, 63 | 12/31/2010 | The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 | Marriage Penalty Relief and Earned Income Tax Credit Simplification | -26,872 |
| 1(h) | 12/31/2010 | The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 | Reduced Rate on Dividends and Capital Gains | -53,151 |
Permanent Extension of 2003 Tax Relief; 20-Percent Capital Gains Rate for Certain High Income Individuals
Explanation of Provision
Under the Act, the tax rates in effect before 2013 for adjusted net capital gain and qualified dividend income are made permanent, except that the 15-percent rate applies only to adjusted net capital gain and qualified dividend income which otherwise would be taxed at a rate below 39.6 percent under the regular tax. A 20-percent rate applies to amounts which would otherwise be taxed at a 39.6- percent rate.288 These rates apply for purposes of both the regular tax and the alternative minimum tax. Thus, tax rates of 0, 15, and 20 percent apply to this income. The Act does not change the tax on net investment income.
Marriage penalty relief and earned income tax credit simplification
Explanation of Provision
Basic standard deduction
The Act permanently increases the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return permanently.
15-percent rate bracket
The Act permanently increases the size of the 15-percent regular income tax rate bracket for a married couple filing a joint return to twice the 15-percent regular income tax rate bracket for an unmarried individual filing a single return permanently.
Earned income tax credit
The Act makes permanent the EITC provisions enacted by EGTRRA. These include: (1) a simplified definition of earned income; (2) a simplified relationship test; (3) a simplified tie-breaking rule; (4) additional math error authority for the Internal Revenue Service; (5) a repeal of the prior-law provision that reduced an individual’s EITC by the amount of his alternative minimum tax liability; and (6) a $3,000 increase in the beginning and ending points of the credit phase-out for married taxpayers.257
Individual income tax rate reductions
Explanation of Provision
The Act permanently extends the EGTRRA individual income tax rates for taxable incomes below the threshold amount. For taxable income above the threshold amount, the 39.6 percent rate which applied prior to the enactment of EGTRRA applies. The threshold amounts are (1) $450,000 in the case of a joint return or surviving spouse, (2) $425,000 in the case of a head of household, (3) $400,000 in the case of an unmarried person who is not a surviving spouse or head of household, and (4) $225,000 in the case of a married individual filing a separate return.248 The threshold amounts are indexed for inflation. For 2013, the individual income tax rate schedules are as follows:
Table 3—Individual Income Tax Rate Schedules for 2013 249
| If taxable income is: | Then income tax equals: |
| Single Individuals | |
| Not over $8,925 | 10% of the taxable income |
| Over $8,925 but not over $36,250 | $892.50 plus 15% of the excess over $8,925 |
| Over $36,250 but not over $87,850 | $4,991.25 plus 25% of the excess over $36,250 |
| Over $87,850 but not over $183,250 | $17,891.25 plus 28% of the excess over $87,850 |
| Over $183,250 but not over $398,350 | $44,603.25 plus 33% of the excess over $183,250 |
| Over $398,350 but not over $400,000 | $115,586.25 plus 35% of the excess over $398,350 |
| Over $400,000 | $116,163.75 plus 39.6% of the excess over $400,000 |
| Head of Households | |
| Not over $12,150 | 10% of the taxable income |
| Over $12,750 but not over $48,600 | $1,275 plus 15% of the excess over $12,750 |
| Over $48,600 but not over $125,450 | $6,652.50 plus 25% of the excess over $48,600. |
| Over $125,450 but not over $203,150 | $25,865 plus 28% of the excess over $125,450 |
| Over $203,150 but not over $398,350 | $47,621 plus 33% of the excess over $203,150 |
| Over $398,350 but not over $425,000 | $112,037 plus 35% of the excess over $398,350 |
| Over $425,000 | $121,364.50 plus 39.6% of the excess over $425,000 |
| Married Individuals Filing Joint Returns and Surviving Spouses | |
| Not over $17,850 | 10% of the taxable income. |
| Over $17,850 but not over $72,500 | $1,785 plus 15% of the excess over $17,850 |
| Over $72,500 but not over $146,400 | $9,982.50 plus 25% of the excess over $72,500 |
| Over $146,400 but not over $223,050 | $28,457.50 plus 28% of the excess over $146,400 |
| Over $223,050 but not over $398,350 | $49,919.50 plus 33% of the excess over $223,050 |
| Over $398,350 but not over $450,000 | $107,768.50 plus 35% of the excess over $398,350 |
| Over $450,000 | $125,846 plus 39.6% of the excess over $450,000 |
| Married Individuals Filing Separate Returns | |
| Not over $8,925 | 10% of the taxable income. |
| Over $8,925 but not over $36,250 | $892.50 plus 15% of the excess over $8,925 |
| Over $36,250 but not over $73,200 | $4,991.25 plus 25% of the excess over $36,250 |
| Over $73,200 but not over $111,525 | $14,228.75 plus 28% of the excess over $73,200 |
| Over $111,525 but not over $199,175 | $24,959.75 plus 33% of the excess over $111,525 |
| Over $199,175 but not over $225,000 | $53,884.25 plus 35% of the excess over $199,175 |
| Over $225,000 | $62,923 plus 39.6% of the excess over $225,000 |
Marginal Individual Income Tax Rate Reductions
Explanation of Provision
The provision extends the 10-percent, 15-percent, 25-percent, 28- percent, 33-percent and 35-percent individual income tax rates for two years (through 2012). The rate structure is indexed for inflation. A comparison of Table 2, below, with Table 1, above, illustrates the tax rate changes. Note that Table 2 also incorporates the provision to retain the marriage penalty relief with respect to the size of the 15 percent rate bracket, as discussed below.
Table 2. – federal individual income tax rates for 2011
Married Individuals Filing Joint Returns and Surviving SpousesMarried Individuals Filing Separate Returns
| If taxable income is: | Then income tax equals: |
| Single Individuals | |
| Not over $8,500 | 10% of the taxable income |
| Over $8,500 but not over $34,500 | $850 plus 15% of the excess over $8,500 |
| Over $34,500 but not over $83,600 | $4,750 plus 25% of the excess over $34,500 |
| Over $83,600 but not over $174,400 | $17,025 plus 28% of the excess over $83,600 |
| Over $174,400 but not over $379,150 | $42,449 plus 33% of the excess over $174,400 |
| Over $379,150 | $110,0116.50 plus 35% of the excess over $379,150 |
| Head of Households | |
| Not over $12,150 | 10% of the taxable income |
| Over $12,150 but not over $46,250 | $850 plus 15% of the excess over $8,500. |
| Over $46,250 but not over $119,400 | $4,750 plus 25% of the excess over $34,500. |
| Over $119,400 but not over $193,350 | $17,025 plus 28% of the excess over $83,600. |
| Over $193,350 but not over $379,150 | $42,449 plus 33% of the excess over $174,400. |
| Over $379,150 | $110,016.50 plus 35% of the excess over $379,150. |
| Married Individuals Filing Joint Returns and Surviving Spouses | |
| Not over $17,000 | 10% of the taxable income. |
| Over $17,000 but not over $69,000 | $1,215 plus 15% of the excess over $12,150. |
| Over $69,000 but not over $119,400 | $6,330 plus 25% of the excess over $46,250. |
| Over $119,400 but not over $193,350 | $24,617.50 plus 28% of the excess over $119,400. |
| Over $193,350 but not over $379,150 | $45,323.50 plus 33% of the excess over $193,350. |
| Over $379,150 | $106,637.50 plus 35% of the excess over $379,150. |
| Married Individuals Filing Separate Returns | |
| Not over $8,500. | 10% of the taxable income. |
| Over $8,500 but not over $34,500 | $850 plus 15% of the excess over $8,500. |
| Over $34,500 but not over $69,675 | $4,750 plus 25% of the excess over $34,500. |
| Over $69,675 but not over $106,150 | $13,543.75 plus 28% of the excess over $69,675. |
| Over $106,150 but not over $189,575 | $23,756.75 plus 33% of the excess over $106,150. |
| Over $189,575 | $51,287 plus 35% of the excess over $189,575. |
Back to “Marginal Individual Income Tax Rate Reductions”
Marriage Penalty Relief and Earned Income Tax Credit Simplification
Explanation of Provision
Basic standard deduction
The provision increases the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return for two years (through 2012).
Fifteen percent rate bracket
The provision increases the size of the 15-percent regular income tax rate bracket for a married couple filing a joint return to twice the 15-percent regular income tax rate bracket for an unmarried individual filing a single return for two years (through 2012).
Earned income tax credit
The provision extends certain EITC provisions adopted by EGTRRA for two years (through 2012). These include: (1) a simplified definition of earned income; (2) a simplified relationship test; (3) use of AGI instead of modified AGI; (4) a simplified tiebreaking rule; (5) additional math error authority for the Internal Revenue Service; (6) a repeal of the prior-law provision that reduced an individual’s EITC by the amount of his alternative minimum tax liability; and (7) increases in the beginning and ending points of the credit phase-out for married taxpayers by $5,000.1530
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Reduced Rate on Dividends and Capital Gains
Explanation of Provision
Under the provision, the regular and minimum tax rates for qualified dividend income and capital gain in effect before 2011 are extended for two additional years (through 2012).
248- For estates and trusts, the 39.6-percent rate applies to all taxable income in the highest rate bracket.
-Return to Explanation of Provision
249- A comparison of Table 3, below, with Table 2, above, illustrates the tax rate changes. Note that Table 3 also incorporates the provision to retain the marriage penalty relief with respect to the size of the 15-percent rate bracket, as discussed below.
-Return to Explanation of Provision
257- The amount is indexed for inflation. See Title I, section C. 3. for additional discussion of the earned income tax credit.
-Return to Explanation of Provision
288- The provisions set forth in the preceding footnote relating to sections 306 and 341 are made permanent, and the tax rate for the accumulated earnings tax and the personal holding company tax is 20 percent.
-Return to Explanation of Provision
1530- The $5,000 amount, which is indexed for inflation annually, also reflects the increase from $3,000 to $5,000 described more fully in Title I, section K of this document, below.
-Return to Explanation of Provision
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