Rate reductions after 2000
(1) 10-percent rate bracket
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(A) In general In the case of taxable years beginning after December 31, 2000 — (i) the rate of tax under subsections (a), (b), (c), and (d) on taxable income not over the initial bracket amount shall be 10 percent, and (ii) the 15 percent rate of tax shall apply only to taxable income over the initial bracket amount but not over the maximum dollar amount for the 15-percent rate bracket.
(B) Initial bracket amount For purposes of this paragraph, the initial bracket amount is— (i) $14,000 in the case of subsection (a), (ii) $10,000 in the case of subsection (b), and (iii) ½ the amount applicable under clause (i) (after adjustment, if any, under subparagraph (C)) in the case of subsections (c) and (d).
(C) Inflation adjustment In prescribing the tables under subsection (f) which apply with respect to taxable years beginning in calendar years after 2003— (i) the cost-of-living adjustment shall be determined under subsection (f)(3) by substituting “2002” for “2016” in subparagraph (A)(ii) thereof, and (ii) the adjustments under clause (i) shall not apply to the amount referred to in subparagraph (B)(iii). If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.
The tables under subsections (a), (b), (c), (d), and (e) shall be applied—
(A) by substituting “25%” for “28%” each place it appears (before the application of subparagraph (B)),
(B) by substituting “28%” for “31%” each place it appears, and
(C) by substituting “33%” for “36%” each place it appears.
(A) 35-percent rate bracket In the case of taxable years beginning after December 31, 2012 — (i) the rate of tax under subsections (a), (b), (c), and (d) on a taxpayer’s taxable income in the highest rate bracket shall be 35 percent to the extent such income does not exceed an amount equal to the excess of— (I) the applicable threshold, over (II) the dollar amount at which such bracket begins, and (ii) the 39.6 percent rate of tax under such subsections shall apply only to the taxpayer’s taxable income in such bracket in excess of the amount to which clause (i) applies.
(B) Applicable threshold For purposes of this paragraph, the term “applicable threshold” means— (i) $450,000 in the case of subsection (a), (ii) $425,000 in the case of subsection (b), (iii) $400,000 in the case of subsection (c), and (iv) ½ the amount applicable under clause (i) (after adjustment, if any, under subparagraph (C)) in the case of subsection (d).
(C) Inflation adjustment For purposes of this paragraph, with respect to taxable years beginning in calendar years after 2013, each of the dollar amounts under clauses (i), (ii), and (iii) of subparagraph (B) shall be adjusted in the same manner as under paragraph (1)(C)(i), except that subsection (f)(3)(A)(ii) shall be applied by substituting “2012” for “2016”.