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» IRS NEWS »
Senate Passes $1.35 Trillion Reconciliation Tax Bill
If you are interested in the legislative process, you can follow
the events of the House, as they address the bill passed by the
Senate yesterday - the Tax RELIEF Act of 2001
The actual text of the tax act that will change your own personal
tax structure and planning for the next decade can be found at:
Technical Explanation of the Tax RELIEF Act:
This week's Amendments to the Tax RELIEF Act:
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But, if you want an encapusulated version of the revisions
that will affect most taxpayers, here goes!
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» Highlights of the Tax RELIEF Act:
Adoption Credit - increases to $10,000 (double)
Self-Employed Health Insurance - will be fully deductible by 2002
Education Savings Account - You will now be able to use that
money to buy of computers, software and Internet access
NEW! Coverdell Education Savings Account - Employers will be able to contribute up to $500 - it won't be taxable to employee
Dependent Care Credit - Expenses increased to $3,000 per child-
up 2 children. (It was $2,400/$4,800)
Deduction for Artistic Works - FMV for music, art, literary work
[Those are from the Amendment - they don't specify when they
would be effective.]
» Tax Rates:
New Tax Bracket for $6,000 and Less ($12,000 for couples) -
10% effective this year
15% Bracket - no change on top income levels
All the other Brackets will decrease by 1%, starting in 2002
28% Bracket => 25% by 2007
31% Bracket => 28% by 2007
36% Bracket => 33% by 2007
39.6% Bracket => 36% by 2007
See page 13 (in Adobe) [page 6 within report]
Child Tax Credit - Increases to $1,000, (by 2011)
in $100/yr increments - starting in 2001 - so expect to get
a credit of $600 per child for your next tax return.
** Marriage Penalty Relief **
Phase-in Starts in 2006 - 2010 (don't hold your breath....)
It covers: Standard Deduction
15% Tax Bracket
Earned Income Credit
And that's it for the Marriage Penalty Relief?!
Education IRAs - Contribution Limits will be raised to $2,000
and it expands expenses that can be deducted if you take
money out early - you will be able to use it for computers
and related costs, among other things - Effective - 2002
Qualified Tuition Programs - Expanded to include school-
sponsored programs, not just state - Effective - 2004
Employer Provided Educational Assistance - Permits costs
for graduate-level courses. Makes it a permanent part of the
bill - Effective 2002 (already in effect through 12/31/200)
Student Loan Interest - Raises the income limit phaseout of the
adjustment to income to $65K ($130K married)
Repeals the 60 month limitation - Effective 2002
** Estate And Gift Taxes ** Repealed as of 2011
Reduction in Gift Tax Rates from 2002 - 2010
Step-Up in Basis is retained for Estates up to $1.3 Million
(Spouse = $4.3 million) [For an explanation of what this means - see TaxMama's Article here.)
** IRAs ** Effective Dates - 2002 forward
Contributions start increasing to $2500 in 2002 -
reaches $5,000 in 2011, increases by $500 afterwards
New! - Catch-Up Contributions for those over 50 - provides for
increased contributions each year
NEW! - Tax-Free Withdrawals for Charitable Contributions
[TaxMama - we'll finally be encouraged to do a little bit of
saving for retirement. Hopefully, we will manage our savings
and grow them better than Social Security? After last year, many
people are feeling a little skittish about their own investments.
I don't understand why the Marriage Tax Penalty revisions won't
take effect for several years. Simply by writing this new tax act,
Congress is admitting the inequality. All this does is simply
make married people's tax structure similar to that of single
people - so why should couples have to wait 5 more years? Will
you live in sin until then? What about children?
The estate tax provisions are a relief! I don't care about rich people
not having to pay estate taxes. If they're really rich, they find a
way around them anyway. I was really concerned about the rest of
us getting penalized with new capital gains taxes. Thank Congress
this isn't going to happen.
Little by little, you will start seeing a little more money in your
pocket. But do NOT run out and change your withholding just yet.]
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For a raw summary, see what the Turbo Tax folks have pulled together.
Year by Year Analysis of HR 1836
Published TaxMama.com 5/25/01 ~ Courtesy IRS
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