Proposed 2011 Tax Rates

On December 6, the Obama Administration and the Republicans arrived at an agreement which included, a 2-year extension of the Bush-era tax cuts for all taxpayers. Based on inflation data, RIA has calculated the tax rate schedules for individuals that would apply for 2011 if the agreement becomes law.

Although the terms of the agreement made no mention of an inflation adjustment, the 2011 and 2012 rates would presumably be adjusted for cost-of-living increases. The adjustments would be based on the average Consumer Price Index (CPI) for the 12-month period ending the previous August 31.

Using the CPI from Aug. 2010, RIA has projected the inflation adjusted 2011 tax rate schedules if the agreement becomes law. RIA also has calculated the inflation adjusted standard deductions for marrieds filing jointly, qualified surviving spouses, and marrieds filing separately (which were the only standard deductions affected by the EGTRRA sunset).

Tax rate schedules, assuming that all current rates are extended under the bipartisan framework agreement. The tax rate schedules for 2011 would be as follows:

FOR MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES, THE 2011 RATE BRACKETS WOULD BE:

If Taxable Income is: The Tax would be:
Not over $17,000 10% of taxable income
Over $17,000 but not over $69,000 $1,700 plus 15% of the excess over $17,000
Over $69,000 but not over $139,000 $9,500 plus 25% of the excess over $69,000
Over $139,000 but not over $212,300 $27,087.50 plus 28% of the excess over $139,350
Over $212,300 but not over $379,150 $47,513.50 plus 33% of the excess over $212,300
Over $379,150 $102,574.00 plus 35% of the excess over $379,150

FOR SINGLE INDIVIDUALS (OTHER THAN HEADS OF HOUSEHOLDS AND SURVIVING SPOUSES), THE 2011 RATE BRACKETS WOULD BE:

If taxable income is: The tax would be:
Not over $8,500 10% of taxable income
Over $8,500 but not over $34,500 $850.00 plus 15% of the excess over $8,500
Over $34,500 but not over $83,600 $4,750.00 plus 25% of the excess over $34,500
Over $83,600 but not over $174,400 $17,025.00 plus 28% of the excess over $83,600
Over $174,400 but not over $379,150 $42,449.00 plus 33% of the excess over $174,400
Over $379,150 $110, 016.50 plus 35% of the excess over $379,150

FOR HEADS OF HOUSEHOLDS, THE 2011 RATE  BRACKETS WOULD BE:

If taxable income is: The tax would be
Not over $12,150 10% of taxable income
Over $12,150 but not over $46,250 $1,215 plus 15% of the excess over $12,150
Over $46,250 but not over $119,400 $6,330.00 plus 25% of the excess over $46,250
Over $119, 400 but not over $193,350 $24,617.50 plus 28% of the excess over $119,400
Over $193,350 but not over $379, 150 $45,323.50 plus 33% of the excess over $193,350
Over $379,150 $106,637.50 plus 35% of the excess over $379,150

FOR MARRIEDS FILING SEPARATE RETURNS, THE 2011 RATE  BRACKETS WOULD BE:

If taxable income is: The tax would be:
Not over $8,500 10% of taxable income
Over $8,500 but not over $34,500 $850.00 plus 15% of the excess over $8,500
Over $34,500 but not over $69,675 $4,750 plus 25% of the excess over $34,500
Over $69,675 but not over $106,150 $13,543.75 plus 28% of the excess over $69,675
over $106,150 but not over $189,575 $23,756.75 plus 33% of the excess over $106,150
Over $189,575 $51,287.00 plus 35% of the excess over $189,575

FOR ESTATES AND TRUSTS, THE 2011 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 over $5,450 $345.00 plus 25% of the excess over $2,300
Over $5,450 but not over $8,300 $1,132.50 plus 28% of the excess over $5,450
Over $8,300 but not over $11,350 $1,930.50 plus 33% of the excess over $8,300
Over $11,350 $2,937.00 plus 35% of the excess over $11,350

Standard deductions. Under the framework agreement, the basic standard deduction for married taxpayers for 2011 is projected to be:

Joint return of surviving spouse $11,600* (up from $11,400 for 2010)
Married filing separate returns $5,800* (up from $5,700 for 2010)

*If the EGTRRA sunset had kicked in, the standard deduction for married taxpayers filing jointly (and qualified surviving spouses) would have been only 167% of the standard deduction for single taxpayers, and the standard deduction for married taxpayers filing separately would have been limited to one half of that amount.

If you have any questions about your 2011 tax rate,or on tax planning in general, give us a call.

© 2010 Thomson Reuters/RIA. All rights reserved.

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