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New Year Will Ring In Tax Changes: CCH Outlines What To Expect On January 1
(RIVERWOODS, ILL., December 20, 2002) – The new year brings a
mixed bag of tax law changes, some of them tied to the changing cost
of living. While many will reap a benefit from increased deductions
and credits, others will find that they are subject to more tax, or
must take smaller deductions. CCH INCORPORATED (CCH), a leading
provider of tax information and software, offers this look at changes
that affect taxpayers, beginning January 1, 2003:
Deductions, Exemptions, Estate Tax
Standard Deductions – In
2003, the standard deduction amounts rise to: $7,950 (filing jointly
and surviving spouse), $3,975 (marrieds filing separately) $4,750
(single) and $7,000 (head of household). The standard deduction for
dependents claimed on another’s return stays the same for 2003 at
Mileage Rate Deductions – The standard per-mile rate used
in taking a deduction for business use of an automobile is 36.0 cents
per mile for 2003, down from 36.5 cents per mile in 2002. The rate for
medical use declines from 13 cents per mile to 12 cents per mile, as
does the rate used in computing moving expense. Charitable use mileage
remains at 14 cents per mile.
Exemptions – Each personal exemption will be worth $3,050
on 2003 returns, up from $3,000 on 2002 returns.
Estate Tax – The top estate tax bracket and rate
will go down in 2003 so that the highest rate will be 49 percent,
payable on taxable estates in excess $2,000,000.
Social Security, Withholding
Social Security Tax Adjustment for Inflation – The
maximum amount of wages subject to Social Security old age, survivors’
and disability withholding increases from $84,900 to $87,000 for 2003.
In 2003, people under
age 65 can earn up to $11,520 before seeing a reduction in their
Social Security benefits. If 2003 is the year in which a person
reaches age 65, he or she may earn up to $2,560 per month until
reaching age 65 without a reduction in benefits. Once taxpayers turn
65, they can earn any amount without a reduction in benefits.
Social Security Income Limits –
Nanny Tax Threshold – You can pay a domestic worker, such
as a maid or nanny, up to $1,400 in 2003 without having to wrestle
with federal payroll tax withholding on wages.
Lifetime Learning Credit – The
limit on eligible expenses on which the 20-percent credit is computed
rises to $10,000, producing a potential maximum credit of $2,000.
IRA Phaseouts – In
2003, the ability for those covered by a qualified plan to make a
deductible contribution to an IRA will begin to phase out at $40,000
in adjusted gross income and end at $50,000 for single filers. For
marrieds filing jointly, the phaseout range is $60,000 to $70,000.
Retirement Plan Contributions – In 2003, the maximum
that can be contributed to a 401(k), 403(b) or 457 plan increases to
$12,000. The limit on elective contributions for SIMPLE 401(k) plans
increases to $8,000 in 2003.
Catch-up Contributions – In 2003, there is an
increase in catch-up contributions for 401(k)s from $1,000 to $2,000
and SIMPLE plans from $500 to $1,000.
Expense Election – The
amount that can be "expensed" rather than depreciated under
Section 179 of the Internal Revenue Code increases to $25,000 in 2003.
Dependent Care Credit – Allowable employment-related
expenses used in figuring the credit increase to $3,000 for one
qualifying child, $6,000 for two or more. Maximum applicable
percentage increases to 35 percent. Phaseout threshold will begin at
$15,000 rather than at $10,000.
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods, Ill., was
founded in 1913 and has served more than four generations of business
professionals and their clients. The company produces more than 700
electronic and print products for the tax, legal, securities, human
resources, health care and small business markets. CCH is a wholly
owned subsidiary of Wolters Kluwer North America. The CCH web site can
be accessed at cch.com.
The Federal and State Tax group web site can be accessed at tax.cchgroup.com.
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