§ 1. Tax imposed
(a)
Married individuals filing joint returns and surviving spouses
There is hereby imposed on the taxable income of—
(1)
every married individual (as defined in section
7703) who makes a single return jointly with his spouse under section
6013, and
(2)
every surviving spouse (as defined in section
2
(a)),
a tax determined in accordance with the following table:
| If taxable income is: | The tax is: |
|---|---|
| Not over $36,900 | 15% of taxable income. |
| Over $36,900 but not over $89,150 | $5,535, plus 28% of the excess over $36,900. |
| Over $89,150 but not over $140,000 | $20,165, plus 31% of the excess over $89,150. |
| Over $140,000 but not over $250,000 | $35,928.50, plus 36% of the excess over $140,000. |
| Over $250,000 | $75,528.50, plus 39.6% of the excess over $250,000. |
(b)
Heads of households
There is hereby imposed on the taxable income of every head of a household (as defined in section
2
(b)) a tax determined in accordance with the following table:
| If taxable income is: | The tax is: |
|---|---|
| Not over $29,600 | 15% of taxable income. |
| Over $29,600 but not over $76,400 | $4,440, plus 28% of the excess over $29,600. |
| Over $76,400 but not over $127,500 | $17,544, plus 31% of the excess over $76,400. |
| Over $127,500 but not over $250,000 | $33,385, plus 36% of the excess over $127,500. |
| Over $250,000 | $77,485, plus 39.6% of the excess over $250,000. |
(c)
Unmarried individuals (other than surviving spouses and heads of households)
There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section
2
(a) or the head of a household as defined in section
2
(b)) who is not a married individual (as defined in section
7703) a tax determined in accordance with the following table:
| If taxable income is: | The tax is: |
|---|---|
| Not over $22,100 | 15% of taxable income. |
| Over $22,100 but not over $53,500 | $3,315, plus 28% of the excess over $22,100. |
| Over $53,500 but not over $115,000 | $12,107, plus 31% of the excess over $53,500. |
| Over $115,000 but not over $250,000 | $31,172, plus 36% of the excess over $115,000. |
| Over $250,000 | $79,772, plus 39.6% of the excess over $250,000. |
(d)
Married individuals filing separate returns
There is hereby imposed on the taxable income of every married individual (as defined in section
7703) who does not make a single return jointly with his spouse under section
6013, a tax determined in accordance with the following table:
| If taxable income is: | The tax is: |
|---|---|
| Not over $18,450 | 15% of taxable income. |
| Over $18,450 but not over $44,575 | $2,767.50, plus 28% of the excess over $18,450. |
| Over $44,575 but not over $70,000 | $10,082.50, plus 31% of the excess over $44,575. |
| Over $70,000 but not over $125,000 | $17,964.25, plus 36% of the excess over $70,000. |
| Over $125,000 | $37,764.25, plus 39.6% of the excess over $125,000. |
(e)
Estates and trusts
There is hereby imposed on the taxable income of—
(2)
every trust,
taxable under this subsection a tax determined in accordance with the following table:
| If taxable income is: | The tax is: |
|---|---|
| Not over $1,500 | 15% of taxable income. |
| Over $1,500 but not over $3,500 | $225, plus 28% of the excess over $1,500. |
| Over $3,500 but not over $5,500 | $785, plus 31% of the excess over $3,500. |
| Over $5,500 but not over $7,500 | $1,405, plus 36% of the excess over $5,500. |
| Over $7,500 | $2,125, plus 39.6% of the excess over $7,500. |
(f)
Phaseout of marriage penalty in 15-percent bracket; adjustments in tax tables so that inflation will not result in tax increases
(1)
In general
Not later than December 15 of 1993, and each subsequent calendar year, the Secretary shall prescribe tables which shall apply in lieu of the tables contained in subsections (a), (b), (c), (d), and (e) with respect to taxable years beginning in the succeeding calendar year.
(2)
Method of prescribing tables
The table which under paragraph (1) is to apply in lieu of the table contained in subsection (a), (b), (c), (d), or (e), as the case may be, with respect to taxable years beginning in any calendar year shall be prescribed—
(3)
Cost-of-living adjustment
For purposes of paragraph (2), the cost-of-living adjustment for any calendar year is the percentage (if any) by which—
(4)
CPI for any calendar year
For purposes of paragraph (3), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.
(5)
Consumer Price Index
For purposes of paragraph (4), the term “Consumer Price Index” means the last Consumer Price Index for all-urban consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.
(7)
Special rule for certain brackets
(A)
Calendar year 1994
In prescribing the tables under paragraph (1) which apply with respect to taxable years beginning in calendar year 1994, the Secretary shall make no adjustment to the dollar amounts at which the 36 percent rate bracket begins or at which the 39.6 percent rate begins under any table contained in subsection (a), (b), (c), (d), or (e).
(B)
Later calendar years
In prescribing tables under paragraph (1) which apply with respect to taxable years beginning in a calendar year after 1994, the cost-of-living adjustment used in making adjustments to the dollar amounts referred to in subparagraph (A) shall be determined under paragraph (3) by substituting “1993” for “1992”.
(8)
Elimination of marriage penalty in 15-percent bracket
With respect to taxable years beginning after December 31, 2003, in prescribing the tables under paragraph (1)—
(A)
the maximum taxable income in the 15-percent rate bracket in the table contained in subsection (a) (and the minimum taxable income in the next higher taxable income bracket in such table) shall be 200 percent of the maximum taxable income in the 15-percent rate bracket in the table contained in subsection (c) (after any other adjustment under this subsection), and
(g)
Certain unearned income of children taxed as if parent’s income
(1)
In general
In the case of any child to whom this subsection applies, the tax imposed by this section shall be equal to the greater of—
(2)
Child to whom subsection applies
This subsection shall apply to any child for any taxable year if—
(A)
such child—
(ii)
(I)
has attained age 18 before the close of the taxable year and meets the age requirements of section
152
(c)(3) (determined without regard to subparagraph (B) thereof), and
(II)
whose earned income (as defined in section
911
(d)(2)) for such taxable year does not exceed one-half of the amount of the individual’s support (within the meaning of section
152
(c)(1)(D) after the application of section
152
(f)(5) (without regard to subparagraph (A) thereof)) for such taxable year,
(3)
Allocable parental tax
For purposes of this subsection—
(A)
In general
The term “allocable parental tax” means the excess of—
(i)
the tax which would be imposed by this section on the parent’s taxable income if such income included the net unearned income of all children of the parent to whom this subsection applies, over
For purposes of clause (i), net unearned income of all children of the parent shall not be taken into account in computing any exclusion, deduction, or credit of the parent.
(B)
Child’s share
A child’s share of any allocable parental tax of a parent shall be equal to an amount which bears the same ratio to the total allocable parental tax as the child’s net unearned income bears to the aggregate net unearned income of all children of such parent to whom this subsection applies.
(4)
Net unearned income
For purposes of this subsection—
(A)
In general
The term “net unearned income” means the excess of—
(i)
the portion of the adjusted gross income for the taxable year which is not attributable to earned income (as defined in section
911
(d)(2)), over
(ii)
the sum of—
(I)
the amount in effect for the taxable year under section
63
(c)(5)(A) (relating to limitation on standard deduction in the case of certain dependents), plus
(II)
the greater of the amount described in subclause (I) or, if the child itemizes his deductions for the taxable year, the amount of the itemized deductions allowed by this chapter for the taxable year which are directly connected with the production of the portion of adjusted gross income referred to in clause (i).
(B)
Limitation based on taxable income
The amount of the net unearned income for any taxable year shall not exceed the individual’s taxable income for such taxable year.
(C)
Treatment of distributions from qualified disability trusts
For purposes of this subsection, in the case of any child who is a beneficiary of a qualified disability trust (as defined in section
642
(b)(2)(C)(ii)), any amount included in the income of such child under sections
652 and
662 during a taxable year shall be considered earned income of such child for such taxable year.
(5)
Special rules for determining parent to whom subsection applies
For purposes of this subsection, the parent whose taxable income shall be taken into account shall be—
(A)
in the case of parents who are not married (within the meaning of section
7703), the custodial parent (within the meaning of section 152(e)) of the child, and
(6)
Providing of parent’s TIN
The parent of any child to whom this subsection applies for any taxable year shall provide the TIN of such parent to such child and such child shall include such TIN on the child’s return of tax imposed by this section for such taxable year.
(7)
Election to claim certain unearned income of child on parent’s return
(A)
In general
If—
(i)
any child to whom this subsection applies has gross income for the taxable year only from interest and dividends (including Alaska Permanent Fund dividends),
(ii)
such gross income is more than the amount described in paragraph (4)(A)(ii)(I) and less than 10 times the amount so described,
(iii)
no estimated tax payments for such year are made in the name and TIN of such child, and no amount has been deducted and withheld under section
3406, and
(iv)
the parent of such child (as determined under paragraph (5)) elects the application of subparagraph (B),
such child shall be treated (other than for purposes of this paragraph) as having no gross income for such year and shall not be required to file a return under section
6012.
(B)
Income included on parent’s return
In the case of a parent making the election under this paragraph—
(i)
the gross income of each child to whom such election applies (to the extent the gross income of such child exceeds twice the amount described in paragraph (4)(A)(ii)(I)) shall be included in such parent’s gross income for the taxable year,
(h)
Maximum capital gains rate
(1)
In general
If a taxpayer has a net capital gain for any taxable year, the tax imposed by this section for such taxable year shall not exceed the sum of—
(A)
a tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of—
(B)
5 percent (0 percent in the case of taxable years beginning after 2007) of so much of the adjusted net capital gain (or, if less, taxable income) as does not exceed the excess (if any) of—
(C)
15 percent of the adjusted net capital gain (or, if less, taxable income) in excess of the amount on which a tax is determined under subparagraph (B);
(D)
25 percent of the excess (if any) of—
(i)
the unrecaptured section
1250 gain (or, if less, the net capital gain (determined without regard to paragraph (11))), over
(2)
Net capital gain taken into account as investment income
For purposes of this subsection, the net capital gain for any taxable year shall be reduced (but not below zero) by the amount which the taxpayer takes into account as investment income under section
163
(d)(4)(B)(iii).
(3)
Adjusted net capital gain
For purposes of this subsection, the term “adjusted net capital gain” means the sum of—
(4)
28-percent rate gain
For purposes of this subsection, the term “28-percent rate gain” means the excess (if any) of—
(5)
Collectibles gain and loss
For purposes of this subsection—
(A)
In general
The terms “collectibles gain” and “collectibles loss” mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section
408
(m) without regard to paragraph (3) thereof) which is a capital asset held for more than 1 year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income.
(B)
Partnerships, etc.
For purposes of subparagraph (A), any gain from the sale of an interest in a partnership, S corporation, or trust which is attributable to unrealized appreciation in the value of collectibles shall be treated as gain from the sale or exchange of a collectible. Rules similar to the rules of section
751 shall apply for purposes of the preceding sentence.
(6)
Unrecaptured section
1250 gain
For purposes of this subsection—
(A)
In general
The term “unrecaptured section
1250 gain” means the excess (if any) of—
(7)
Section
1202 gain
For purposes of this subsection, the term “section
1202 gain” means the excess of—
(9)
Regulations
The Secretary may prescribe such regulations as are appropriate (including regulations requiring reporting) to apply this subsection in the case of sales and exchanges by pass-thru entities and of interests in such entities.
(11)
Dividends taxed as net capital gain
(A)
In general
For purposes of this subsection, the term “net capital gain” means net capital gain (determined without regard to this paragraph) increased by qualified dividend income.
(B)
Qualified dividend income
For purposes of this paragraph—
(i)
In general
The term “qualified dividend income” means dividends received during the taxable year from—
(ii)
Certain dividends excluded
Such term shall not include—
(I)
any dividend from a corporation which for the taxable year of the corporation in which the distribution is made, or the preceding taxable year, is a corporation exempt from tax under section
501 or
521,
(II)
any amount allowed as a deduction under section
591 (relating to deduction for dividends paid by mutual savings banks, etc.), and
(iii)
Coordination with section
246
(c)
Such term shall not include any dividend on any share of stock—
(C)
Qualified foreign corporations
(i)
In general
Except as otherwise provided in this paragraph, the term “qualified foreign corporation” means any foreign corporation if—
(ii)
Dividends on stock readily tradable on United States securities market
A foreign corporation not otherwise treated as a qualified foreign corporation under clause (i) shall be so treated with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States.
(iii)
Exclusion of dividends of certain foreign corporations
Such term shall not include any foreign corporation which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company (as defined in section
1297).
(D)
Special rules
(i)
Amounts taken into account as investment income
Qualified dividend income shall not include any amount which the taxpayer takes into account as investment income under section
163
(d)(4)(B).
(ii)
Extraordinary dividends
If a taxpayer to whom this section applies receives, with respect to any share of stock, qualified dividend income from 1 or more dividends which are extraordinary dividends (within the meaning of section
1059
(c)), any loss on the sale or exchange of such share shall, to the extent of such dividends, be treated as long-term capital loss.
(i)
Rate reductions after 2000
(1)
10-percent rate bracket
(A)
In general
In the case of taxable years beginning after December 31, 2000—
(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 “1992” in subparagraph (B) 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.
(2)
Reductions in rates after June 30, 2001
In the case of taxable years beginning in a calendar year after 2000, the corresponding percentage specified for such calendar year in the following table shall be substituted for the otherwise applicable tax rate in the tables under subsections (a), (b), (c), (d), and (e).
| In the case of taxable years beginning during calendar year: | The corresponding percentages shall be substituted for the following percentages: | 28% | 31% | 36% | 39.6% | |
|---|---|---|---|---|---|---|
| 2001 | 27.5% | 30.5% | 35.5% | 39.1% | ||
| 2002 | 27.0% | 30.0% | 35.0% | 38.6% | ||
| 2003 and thereafter | 25.0% | 28.0% | 33.0% | 35.0% |