Many people are beginning to wrap their minds around the House Republicans’ proposed destination-based cash-flow tax and what it means for tax reform. Most people are still looking into the tax’s impacts on trade and how...
- What Tax Bracket Will You Be in for 2013?
What Tax Bracket Will You Be in for 2013?
Tax Foundation Estimates New Brackets Based on Inflation Rate
Washington, D.C., October 1, 2012— The Tax Foundation, based on recently released data from the federal government, has estimated federal income tax brackets for tax year 2013, as detailed in a new analysis published today. Analyst Nick Kasprak also examines alternate brackets that would come into effect if Congress were to vote to extend the Bush-era tax cuts and other policies, or if President Obama’s 2013 budget plan were passed.
The Bureau of Labor Statistics recently released its August 2012 consumer price index figure, which is typically the final piece of information needed to determine the next year’s tax brackets. Brackets are adjusted for inflation based on the consumer price index from September to August of the previous year. Given that the CPI-U (consumer price index for all urban consumers) average for the previous twelve months is 2.57% higher than the previous year, parameters for tax year 2013 will be roughly 2.57% higher than for 2012.
“Projecting tax brackets for 2013 is more complicated than usual, given the uncertainty surrounding the potential expiration of the Bush tax cuts and some more recent stimulus bill tax cuts,” said Analyst Nick Kasprak.
Despite the complication caused by multiple expiring provisions, however, the different tax parameters are adjusted for inflation in more or less the same way, meaning that the Tax Foundation can project next year’s parameters under a variety of scenarios with a high degree of certainty.
Even though taxpayers will not start filing their 2013 tax returns until January 2014, tax year 2013 parameters are needed in advance so that the Internal Revenue Service can produce instructions for 2013 income tax withholding, which will begin in January. Therefore, the inflation adjustments for any tax year must be based on Consumer Price Index data from portions of the previous two years.
The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or firstname.lastname@example.org.
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