tax policy center
Tax Topics

Tax Topics

2009 Tax Stimulus
2012 Election Tax Plans
2014 Budget
Alternative Minimum Tax (AMT)
American Jobs Act of 2011
Brief Description of the Model 2013
Current-Law Distribution of Taxes
Deficit Reduction Proposals
Distribution of the 2001 - 2008 Tax Cuts
Earned Income Tax Credit
Economic Stimulus
Education Tax Incentives
Estate and Gift Taxes
Expiration of the Bush Tax Cuts
Explanation of Income Measures 2013
Federal Budget
Fiscal Cliff
Fiscal Crisis
Flow-Through-Enterprises
Guide to TPC Tables
Health Insurance Tax Incentives
Homeownership
How to Interpret Distribution Tables 2013
Marriage Penalties
Model FAQ 2013
Model Related Resources and FAQs
Payroll Taxes
Presidential Transition - 2009
Recent Tax Stimulus Legislation
Retirement Saving
Tax Encyclopedia Index
Tax Expenditures
Tax Reform Proposals
Value-Added Tax (VAT)
Who Doesn't Pay Federal Taxes?
Working Families

E-mail Newsletter

Enter your e-mail address to receive periodic updates on TPC publications and events.

> newsletter archive

tax topics
 
Descriptions of Tax Policies in Tax Calculator

Three Tax Laws:


2012 Law with AMT Patch

Tax law in 2012 reflects the 2010 extension of the 2001 (EGTRRA) and 2003 (JGTRRA) tax cuts and the tax provisions in the 2009 stimulus act (ARRA). The provisions used in the tax calculator are:

  • Six regular tax rates: 10%, 15%, 25%, 28%, 33%, and 35%.
  • Two tax rates on long-term capital gains and qualified dividends: 0% (for those with regular tax rates 15% or lower) and 15% (for those with regular tax rates above 15%). Qualified dividends are treated the same as long-term capital gains.
  • No phaseout of personal exemptions or limitation on itemized deductions for high-income taxpayers.
  • The standard deduction and width of 10% and 15% tax brackets for couples filing jointly are double those for single filers.
  • The earned income tax credit (EITC) includes a phase-in rate of 45% for families with three or more children. The phase-out threshold of the EITC for joint filers is $5,340 above the phase-out threshold for single filers in 2013.
  • Child tax credit of $1,000 per child. The credit is refundable at a rate of 15% of earnings in excess of $3,000.
  • Child and dependent care tax credit of between 20% and 35% of up to $3,000 per child (to a maximum of $6,000) of spending on care required so the taxpayer can work. The credit rate phases down from 35% by 1 percentage point for each $2,000 of income over $15,000 until it reaches the minimum 20% for families with income over $43,000.
  • Saver's credit of 50%, 20%, or 10% (depending on AGI) of contributions to retirement savings accounts; up to $2,000 in contributions per individual. Credit is non-refundable.
  • American opportunity tax credit equal to 100% of first $2,000 and 25% of next $2,000 spent on tuition and fees for post-secondary education. Credit is 40% refundable and may be claimed for up to four years.
  • Lifetime learning credit equal to 20% of up to $10,000 in qualifying expenses for the full tax unit. It is non-refundable but students face no year or full-time status restrictions to be eligible.

Pre-ATRA 2013 Law - Fiscal Cliff

The 2001 (EGTRRA) and 2003 (JGTRRA) tax cuts and the tax provisions in the 2009 stimulus act (ARRA) were scheduled to expire in 2013, returning the tax code mostly to that which existed prior to 2001. Pre-ATRA 2013 Law assumes that all of those provisions expired as scheduled and that most provisions of the tax code reverted to pre-2001 law. Specifically, pre-2001 tax law includes the following provisions that differ from the 2012 tax law with AMT patch:

  • Five regular tax rates: 15%, 28%, 31%, 36%, and 39.6%.
  • Two tax rates on long-term capital gains: 10% (for those with regular tax rates 15% or lower) and 20% (for those with regular tax rates above 15%). Both tax rates are reduced by 2 percentage points for gains on assets owned for five years or longer.
  • Qualified dividends face ordinary income tax rates.
  • Phase-out of personal exemptions and limitation on itemized deductions both apply for high-income taxpayers.
  • Standard deduction and width of 15% tax brackets for couples filing jointly are 1.67 times those for single filers. The threshold for phaseout of the EITC is the same for all households.
  • Child tax credit equals $500 per child and is refundable only for large families to the extent that their FICA taxes exceed any EITC they receive.
  • Child and dependent care tax credit of between 20% and 30% of up to $2,400 per child (to a maximum of $4,800) of spending on care required so the taxpayer can work. The credit rate phases down from 30% by 1 percentage point for each $2,000 of income over $10,000 until it reaches the minimum 20% for families with income over $28,000.
  • EITC phase-in rate of 40% for families with two or more children.
  • Saver's credit of 50%, 20%, or 10% (depending on AGI) of contributions to retirement savings accounts; up to $2,000 in contributions per individual. Credit is non-refundable.
  • Hope tax credit equal to 100% of first $1,300 and 50% of next $1,200 spent on tuition and fees for post-secondary education. Credit is not refundable and may be claimed for up to two years. (American opportunity tax credit does not apply.)
  • Lifetime learning credit equal to 20% of up to $10,000 in qualifying expenses for the full tax unit. It is non-refundable, but students face no year or full-time status restrictions to be eligible.

American Taxpayer Relief Act of 2012 (ATRA)

  • Seven regular tax rates: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
  • Three tax rates on long-term capital gains: 0% for those with a marginal tax rate 15% or lower; 15% for those with marginal tax rates of 25%, 28%, 33%, and 35%; and 20% for those with a marginal tax rate of 39.6%. Qualified dividends are treated the same as long-term capital gains.
  • Phaseout of personal exemptions and limitation on itemized deductions both apply for high-income taxpayers, starting at AGI of $300,000 for couples filing jointly, $275,000 for heads of household, and $250,000 for single filers.
  • Standard deduction and widths of the 10% and 15% brackets for couples filing jointly are double those for single filers.
  • EITC phaseout threshold for married couples filing jointly is $5,340 above that for single filers. A 45% phase-in rate applies for families with three or more children.
  • The child tax credit amount is $1,000 per child; the credit is refundable at a 15% rate based on earnings over $3,000.
  • Child and dependent care tax credit of between 20% and 35% of up to $3,000 per child (to a maximum of $6,000) of spending on care so the taxpayer can work. The credit rate phases down from 35% by 1 percentage point for each $2,000 of income over $15,000 until it reaches the minimum 20% for families with income over $43,000.
  • Saver’s credit of 50%, 20%, or 10% (depending on AGI) of contributions to retirement savings accounts; up to $2,000 in contributions per individual are eligible. Credit is non-refundable.
  • American opportunity tax credit is 100% of first $2,000 and 25% of next $2,000 spent on tuition and fees for post-secondary education. Credit is 40% refundable and may be claimed for up to four years. There is no Hope credit.
  • Lifetime learning credit equals to 20% of up to $10,000 in qualifying expenses for the full tax unit. It is non-refundable, but students face no year or full-time status restrictions to be eligible.
  • The alternative minimum tax (AMT) exemption is $80,800 for married couples filing jointly and $51,900 for single filers.
  • The tax rate for the FICA payroll tax funding Social Security is 6.2% for both employees and employers.
  • New taxes associated with the 2010 healthcare legislation take effect for high-income households:
    1. 0.9% of earnings over $200,000 ($250,000 for a couple’s combined earnings)
    2. 3.8% of the smaller of investment income or the amount by which AGI exceeds $200,000 ($250,000 for married couples filing jointly)