America’s 2013 federal tax brackets were influenced by many factors, including efforts made in recent decades to try and prevent various segments of society from bearing unfair burdens. Indexing for inflation usually helps a great many people since these adjustments “tend to preserve the value of most, but not all, of the dollar-based benefits under the Tax Code year after year.” Stated differently, based upon the constancy of inflation, “indexing of brackets lowers tax bills by including more of people's incomes in lower brackets . . . The format used in indexing showed a slightly lower amount of inflation this year over last, just over 1.5 percent.”
How Higher-Income Taxpayers Were Affected by Tax Year 2013
According one recent article, “New for the 2013 tax year [was] the 39.6 % tax bracket for higher-income taxpayers, enacted by [the American Taxpayer Relief Act of 2012] ATRA.” Although this new legislation addresses a variety of issues, it basically extended the President George W. Bush tax cuts. ATRA also preserve the alternative minimum tax provisions (AMT) and the ongoing practice of inflation indexing for tax years following 2013.
Higher-income taxpayers also had to adjust to two “Medicare” taxes that became effective for tax year 2013. “They are the 3.8 percent surtax on net investment income and a 0.9 percent Medicare contributions tax on earned income.” Specific, higher income levels trigger these net investment income taxes; this also holds true regarding additional Medicare contributions that are tied to a taxpayer’s higher wages, compensation or self-employment income.
Comparing Sample Tax Brackets for Tax Years 2012 and 2013
In 2012, there was no need to file a tax return in most cases if you were single and earned less than $8,700. To remain in this same 10% tax bracket, you could earn as much as $12,400 if you filed as head of household. In 2013, most taxpayers earning less than$8,925 did not need to file -- and the maximum amount of earnings allowed for someone in this 10% tax bracket who filed as the head of household was $12,750;
In 2012, those earning in what some might still classify as the “middle class” range, saw their wages taxed at a 25% rate if they were married and filing jointly with earnings ranging from $70,701 - all the way up to$122,300 if filing as married head of household. In contrast, during tax year 2013, those who were married and filing jointly could be taxed at the 25% tax rate if they earned $72,501 – all the way up to $125,450.
As these sample comparisons indicate, tax brackets continue to change in rather minimal increments each year. Make sure you consult with your Peachtree City attorney so that you’ll be able to better plan for and receive all valid tax deductions you're entitled to receive.
To obtain help with handling all of your Georgia business planning needs, please contact Shane Smith Law today. You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.