Modifications to income tax brackets for high-income taxpayers

(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”.