What are the 2012 Marginal Tax Rates?

By D.A. Barber , last updated February 11, 2012

The marginal tax rate is, “the percentage of tax applied to your income for each tax bracket in which you qualify,” according to InvestingAnswers.

Fundamentally, your marginal tax rate is the percentage amount the IRS takes from the next dollar of your taxable income each time you exceed the defined income threshold of each tax bracket. This varies from your average tax rate, which is the total tax you pay as a percentage of your total earned income, because you're marginal rate is paid only on the highest segment of your income.

The federal tax brackets that set the marginal tax rates signify what the cutoff thresholds for your taxable income will be taxed at the next tax bracket level. The same marginal tax rates that applied in 2010 and 2011 have been extended to apply through the end of 2012 due to the Tax Relief Act of 2010. Before the 2010 Tax Relief Act was passed, the six tax rate brackets were actually poised to jump to 15, 28, 31, 36, and 39.6 percent. Instead, they remain at 10, 15, 25, 28, 33, or 35 percent. Those tax rates could automatically slip back in 2013 if new legislation is not again passed.

2012 Marginal Tax Rates

The marginal tax rate you’ll pay in April 2013 is the percentage you pay on your income as it moves into the one of the next six brackets of 10, 15, 25, 28, 33, and 35 percent. For example, if your taxable income falls into the third bracket of 25 percent, you’ll pay the 10 percent rate up to that threshold, then 15 percent on the next share, and the 25 percent rate on only the remaining portion. The result is that your marginal rate would be 25 percent, though you are not really paying that percentage on all your total income.

According to the Internal Revenue Code section 1(c), Tax Rate Schedule X, the six Federal Tax Brackets establishing the marginal tax rate for an individualfor 2012 work like this:

  • 10 percent on taxable income $0 to $8,700
  • 15 percent over $8,700 but not over $35,350: You pay $870 plus 15 percent on anything over $8,700
  • 25 percent over $35,350 but not over $85,650: You pay $4,867.50 plus 25 percent on anything over $35,350
  • 28 percent over $85,650 but not over $178,650: You pay $17,442.50 plus 28 percent on anything over $85,650
  • 33 percent over $178,650 but not over $388,350: You pay $43,482.50 plus 33 percent on anything over $178,650
  • 35 percent over $388,350: You pay $112,683.50 plus 35 percent on anything over $388,350

Using Marginal Tax Rates

These marginal tax rates differ for couples who file joint returns or separate returns, and “head of households.” You can use this tax rate schedule in numerous ways to plan how much tax you’ll pay on extra income you earn, and how much tax you will save by escalating your deductions. But keep in mind that marginal tax rates interrelate with other tax rates, such as Social Security and Medicare tax rates, as well as the alternative minimum tax.

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