Statutory individual income tax rates are the tax rates that apply
by law to various amounts of taxable income. Statutory rates lay the
foundation for marginal and average effective tax rates, which most
economists believe have a greater impact on the economic behavior of companies
and individuals than statutory rates. Marginal effective rates reflect the
net effect of special tax provisions on statutory rates. They are to be
distinguished from average effective rates, which measure someone’s tax
Current statutory and effective individual tax rates are the result of the Tax
Reform Act of 1986 (TRA86; P.L. 99-514) and several tax laws that have
been enacted since 1986. Of particular importance are the Omnibus Budget
Reconciliation Act of 1990 (OBRA90; P.L. 101-508), the Omnibus Budget
Reconciliation Act of 1993 (OBRA93; P.L. 103-66), the Economic Growth and Tax
Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16), the Tax Relief,
Unemployment Insurance Reauthorization, and Job Creation Act of 2010
(TRUC; P.L. 111-312), and the American Taxpayer Relief Act of 2012 (ATRA,
P.L. 112-240). TRA86 made major changes in the income tax rate structure.
EGTRRA established what are referred to as the Bush-era tax cuts for individuals.
TRUC extended those cuts for another two years, through 2012. And ATRA permanently
extended the Bush-era tax rates for taxpayers with taxable incomes below
$400,000 for single filers and $450,000 for joint filers but reinstated
the 39.6% top rate established by OBRA93 for taxpayers with taxable
incomes equal to or above those amounts.
There are seven statutory individual income tax rates in 2013 for ordinary
income: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. Income from long-term
capital gains and dividends is taxed at 0% for individuals subject to the
15% tax bracket; 15% for individuals subject to the 25%, 28%, 33%, or 35%
brackets; and 20% for taxpayers taxed at 39.6%. Starting in 2013, a 3.8% tax is imposed
on the lesser of net investment income received by individuals, estates, or
trusts, or the amount of their modified adjusted gross incomes above the
threshold amounts of $250,000 for joint filers and $125,000 for single
filers. In addition, the individual alternative minimum tax (AMT), which
functions like a separate income tax in that its rate structure is more
compressed and tax base wider than those of the regular income tax, taxes
income above exemption amounts of $80,800 for joint filers and $51,900 for
single filers in 2013 at rates of 26% and 28%.
Tax rates and the income brackets to which they apply are not the only elements
of the individual income tax that determine the tax liabilities of
taxpayers. Personal exemptions, exclusions, deductions, credits, and
certain other elements have an effect as well.
Some of these elements are indexed for inflation. Congress added annual
indexation to the individual income tax in 1981. The primary advantage of
such a mechanism is that it helps prevent real tax increases and
unintended shifts in the distribution of the tax burden driven by inflation
alone. Indexed elements include tax rate brackets, personal exemptions and
their phaseout thresholds, standard deductions, the itemized deduction
limitation threshold, and the AMT exemption amounts.
This report summarizes the tax brackets and other key elements of the
individual income tax that help determine taxpayers’ marginal and average
effective tax rates going back to 1988. It is updated annually to reflect
the most recent indexation adjustments and any statutory changes.
Date of Report: February 1, 2013
Number of Pages: 49 Order Number: RL34498 Price: $29.95
For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card
number, expiration date, and name on the card. Indicate whether you want e-mail
or postal delivery. Phone orders are preferred and receive priority processing.