### Projected income tax rate schedules for 2013 under two alternative scenarios

At this time, there is uncertainty over which income tax rates will apply for 2013. The uncertainty stems from the EGTRRA sunset and the extent to which Congress may alter it.

If the EGTRRA sunset kicks in, the 10% bracket would be eliminated, the 15% bracket would include income previously taxed at 10%, and the 25%, 28%, 33%, and 35% brackets would be increased to 28%, 31%, 36%, and 39.6%, respectively. Except for the elimination of the 10% bracket, the range of the brackets would be exactly the same as if the EGTRRA sunset did not apply at all, except for married taxpayers where the 15% range for married taxpayers filing jointly would end at about 167% of the amount at which the range for single taxpayers ends, and the 15% range for married taxpayers filing separately would end at half the amount at which the range for married taxpayers filing jointly ends. While there seems to be little support for having the EGTRRA sunset apply in full, we have reproduced what the projected ranges for tax brackets and taxes for 2013 would be if that did happen, e.g., because Congress and the Administration could not reach an agreement on what the rates and brackets should be for next year.

As explained by the staff of the Joint Committee of Taxation (JCS-2-12), the President's proposal would permanently extend the 10%, 15%, 25% and 28% individual income tax rates. For tax years beginning after Dec. 31, 2012, the President's proposal would split the 33% rate bracket into a 33% and a 36% rate bracket. The 35% rate bracket would become the 39.6% bracket, as per current law (i.e., the scheduled EGTRRA sunset). The proposal would set the top of the 33% tax rate bracket (the bottom of the 36% rate bracket) so that single individuals with less than $202,900 of taxable income in 2013 ($200,000 of adjusted gross income (“AGI”), assuming one personal exemption and the basic standard deduction, indexed from 2009) would not be subject to the new 36% rate. For married individuals filing joint returns and surviving spouses, the proposal would set the top of the 33% tax rate bracket (the bottom of the 36% rate bracket) so that individuals with taxable income below $246,200 in 2013 ($250,000 of AGI, assuming two personal exemptions and the basic standard deduction, indexed from 2009) who are currently subject to the 33% rate would not become subject to the new 36% rate. For head of household filers, the starting point of the 36% bracket would be set at the midpoint of the starting points for single filers and married joint filers, rounded down to the nearest $50, or $224,550.

Here are the alternative rate schedules.

**Tax rate schedules if the EGTRRA sunset applies.**As inflation-adjusted by RIA, the tax rate schedules for 2013 would be as follows if the EGTRRA sunset applies:

FOR MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ----------- Not over $60,550 15% of taxable income Over $60,550 but not $9,082.50 plus 28% of the over $146,400 excess over $146,400 Over $146,400 but not $33,120.50 plus 31% of the over $223,050 excess over $146,400 Over $223,050 but not $56,882.00 plus 36% of the over $398,350 excess over $223,050 Over $398,350 $119,990.00 plus 39.6% of the excess over $398,350

FOR SINGLE INDIVIDUALS (OTHER THAN HEADS OF HOUSEHOLDS AND SURVIVING SPOUSES), THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ---------- Not over $36,250 15% of taxable income Over $36,250 but not $5,437.50 plus 28% of the over $87,850 excess over $36,250 Over $87,850 but not $19,885.50 plus 31% of the over $183,250 excess over $87,850 Over $183,250 but not $49,459.50 plus 36% of the over $398,350 excess over $183,250 Over $398,350 $126,895.50 plus 39.6% of the excess over $398,350

FOR HEADS OF HOUSEHOLDS, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ----------- Not over $48,600 15% of taxable income Over $48,600 but not $7,290.00 plus 28% of the over $125,450 excess over $48,600 Over $125,450 but not $28,808.00 plus 31% of the over $203,150 excess over $125,450 Over $203,150 but not $52,895.00 plus 36% of the over $398,350 excess over $203,150 Over $398,350 $123,167.00 plus 39.6% of the excess over $398,350

FOR MARRIEDS FILING SEPARATE RETURNS, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ----------- Not over $30,275 15% of taxable income Over $30,275 but not $4,541.25 plus 28% of the over $73,200 excess over $30,275 Over $73,200 but not $16,560.25 plus 31% of the over $111,525 excess over $73,200 Over $111,525 but not $28,441.00 plus 36% of the over $199,175 excess over $111,525 Over $199,150 $59,995.00 plus 39.6% of the excess over $199,175

FOR ESTATES AND TRUSTS, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: --------------------- ----------- Not over $2,450 15% of taxable income Over $2,450 but not $367.50 plus 28% of the over $5,700 excess over $2,450 Over $5,700 but not $1,277.50 plus 31% of the over $8,750 excess over $5,700 Over $8,750 but not $2,223.00 plus 36% of the over $11,950 excess over $8,750 Over $11,950 $3,375.00 plus 39.6% of the excess over $11,950

**Tax rate schedules if President's proposal were adopted.**The tax rate schedules for 2013 as appearing in JCS-2-12 would be as follows:

FOR MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ----------- Not over $17,800 10% of taxable income Over $17,800 but not $1,780.00 plus 15% of the over $72,300 excess over $17,800 Over $72,300 but not $9,955.00 plus 25% of the over $145,900 excess over $72,300 Over $145,900 but not $28,335.00 plus 28% of the over $222,300 excess over $145,900 Over $222,300 but not $49,747.00 plus 33% of the over $246,200 excess over $222,300 Over $246,200 but not $57,634.00 plus 36% of the over $397,000 excess over $246,200 Over $397,000 $111,922.00 plus 39.6% of the excess over $397,000

FOR SINGLE INDIVIDUALS (OTHER THAN HEADS OF HOUSEHOLDS AND SURVIVING SPOUSES), THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ---------- Not over $8,900 10% of taxable income Over $8,900 but not $890.00 plus 15% of the over $36,150 excess over $8,900 Over $36,150 but not $4,978.00 plus 25% of the over $87,550 excess over $36,150 Over $87,550 but not $17,828.00 plus 28% of the over $182,600 excess over $87,550 Over $182,600 but not $44,442.00 plus 33% of the over $202,900 excess over $182,600 Over $202,900 but not $51,140.00 plus 36% of the over $397,000 excess over $202,900 Over $397,000 $121,016.00 plus 39.6% of the excess over $397,000

FOR HEADS OF HOUSEHOLDS, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ----------- Not over $12,700 10% of taxable income Over $12,700 but not $1,270.00 plus 15% of the over $48,400 excess over $12,700 Over $48,400 but not $6,625.00 plus 25% of the over $125,000 excess over $48,400 Over $125,000 but not $25,775.00 plus 28% of the over $202,450 excess over $125,000 Over $202,450 but not $47,461.00 plus 33% of the over $224,550 excess over $202,450 Over $224,550 but not $54,754.00 plus 36% of the over $397,000 excess over $224,550 Over $397,000 $116,836.00 plus 39.6% of the excess over $397,000

FOR MARRIEDS FILING SEPARATE RETURNS, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: -------------------- ----------- Not over $8,900 10% of taxable income Over $8,900 but not $890.00 plus 15% of the over $36,150 excess over $8,900 Over $36,150 but not $4,977.00 plus 25% of the over $72,950 excess over $36,150 Over $72,950 but not $14,177.00 plus 28% of the over $111,150 excess over $72,950 Over $111,150 but not $24,873.00 plus 33% of the over $123,100 excess over $111,150 Over $123,100 but not $28,817.00 plus 36% of the over $198,500 excess over $123,100 Over $198,500 $55,961.00 plus 39.6% of the excess over $198,500

FOR ESTATES AND TRUSTS, THE 2013 RATE BRACKETS WOULD BE: If taxable income is: The tax would be: --------------------- ----------- Not over $2,300 15% of taxable income Over $2,300 but not $345.00 plus 25% of the over $5,450 excess over $2,300 Over $5,450 but not $1,132.50 plus 28% of the over $8,300 excess over $5,450 Over $8,300 but not $1,930.50 plus 36% of the over $11,350 excess over $8,300 Over $11,350 $3,028.50 plus 39.6% of the excess over $11,350

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