 Vernon K. Jacobs, CPA |
How the 2003 Tax Law Affects Your Investments
an e-Book by
Vernon Jacobs
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Vernon K. Jacobs, CPA
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| Variable Tax Data |
Note: Due to indexing of various tax variables to keep up with inflation and to the practice of phasing in the introduction of new tax laws or phasing out the elimination of older tax laws, there is a continuous process of change in the following tax variables such as the standard deduction, exemption amounts and other deductions or credits. The following tabulation is based on a variety of sources as of June 25, 2003 and reflects the changes introduced by the Jobs and Growth Tax Relief Reconciliation Act of 2003. This tabulation is not represented as including all tax variables that change from year to year. Amounts shown after 2003 are based on amounts that are phased in or out. Amounts in bold format represent changes by the 2003 tax law. Blank cells are based on indexed amounts or are not yet known.
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2004 | 2005 | 2006 |
| Standard Deduction | ||||||
| - single (Not head of household or a surviving spouse) | 4,550 |
4,700 |
4,750 |
4,850 | |
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| Married filing jointly & surviving spouse | 7,600 |
7,900 |
9500 | 9,700 |
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| - head of household | 6,650 |
6,900 |
7,000 |
7,150 |
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| - married filing separately | 3,800 |
3,925 |
4,750 | 4,850 |
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| - additional amount for those over age 65 or blind and married | 900 |
900 |
950 |
950 |
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| - additional amount for those over age 65 or blind and single | 1,100 |
1,150 |
1,150 |
1,200 |
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| - dependents' standard deduction (or =
earned income + 250 if greater) |
750 |
750 |
750 |
800 |
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| Base adjusted gross income at which some deductions are phased out: | ||||||
| --- single, head of household, married filing jointly | 132,950 |
137,300 |
139,500 |
142,700 |
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| --- married filing separately | 66,475 |
68,650 |
69,750 |
71,350 |
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| Personal Exemption | ||||||
| - Deduction for each personal exemption or dependent | 2,900 |
3,000 |
3,050 |
3,100 |
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| - Estate exemption |
600 |
600 |
600 |
600 |
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| - Simple trust exemption |
300 |
300 |
300 |
300 |
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| - Complex trust exemption |
100 |
100 |
100 |
100 |
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| Base adjusted gross income for phaseout of exemption: | ||||||
| --- single | 132,950 |
137,300 |
139,500 |
142,700 |
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| --- head of household | 166,200 |
171,650 |
174,000 |
178,350 |
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| --- married filing jointly | 199,450 |
206,000 |
209,250 |
214,050 |
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| --- married filing separatley | 99,725 |
103,000 |
104,625 |
107,025 |
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| Itemized Deduction Exclusions |
||||||
| - Percent of AGI for medical expense
exclusion |
7.5% |
7.5% |
7.5% |
7.5% |
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| - Percent of AGI for miscellaneous
itemized deduction exclusion |
2% |
2% |
2% |
2% |
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| - Percent of AGI for casualty loss
deduction exclusion |
10% |
10% |
10% |
10% |
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| Maximum child tax credit |
$600 |
$1,000 |
$1,000 |
$700 |
$800 |
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| Long Term Capital Gain Maximum Tax Rates |
||||||
| --- for taxpayers above the 15% tax bracket |
20% |
20% |
20% / 15% * |
15% |
15% |
15% |
| --- for taxpayers in the 15%or lower tax
bracket |
10% |
10% |
10% / 5% * |
15% |
15% | 15% |
| - Recaptured depreciation on real estate
held more than 12 months |
25% |
25% |
25% |
25% |
25% |
25% |
| - Gain on collectibles held more than 12
months |
28% |
28% |
28% |
28% |
28% |
28% |
| *
Amounts in bold apply after 5/5/2003 |
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| Maximum Rate on Dividends |
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| - For taxpayers in
or below the 15% tax bracket |
n/a |
n/a |
5% |
5% | 5% |
5% |
| - For taxpayer in
brackets over 15% |
n/a |
n/a |
15% |
15% | 15% | 15% |
| Alternative Minimum Tax Exemption |
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| - Single and Head Household | 35,750 |
35,750 |
40,250 | 40,250 |
33,750 |
??? |
| - Married filing Joint returns |
49,000 |
49,000 |
58,000 | 58,000 |
45,000 |
??? |
| - Married filing separate |
24,500 |
24,500 |
29,000 |
29,000 |
22,500 |
??? |
| Education Credit and Deduction Limits |
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| - Maximum HOPE scholarship credit |
1,500 |
1,500 |
1,000 + 50% of excess |
1,000 + 50% of excess |
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| - Maximum Lifetime Learning credit |
1,000 |
1,000 |
1,000 |
1,000 |
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| - Maximum student loan interest
deduction |
2,500 |
2,500 |
2,500 |
2,500 |
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| - Deduction for higher education
expenses |
3,000 |
3,000 |
3,000 |
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| - Maximum employer education
deduction per employee |
5,250 |
5,250 |
5,250 |
5,250 |
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| - Education IRA deduction limit |
500 |
2,000 |
2,000 |
2,000 |
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| - Education IRA maximum AGI for full
deduction |
||||||
| --- single and head of household and
MFS |
95,000 |
95,000 |
95,000 |
95,000 |
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| --- joint returns |
150,000 |
190,000 |
190,000 |
190,000 |
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| Social Security & Payroll Tax Amounts | ||||||
| - maximum earnings subject to FICA tax | 80,400 |
84,900 |
87,000 |
87,900 |
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| - employee or employer FICA tax rate | 6.2% |
6.2% |
6.2% |
6.2% | ||
| - employee plus employer FICA tax rate and self employed rate | 14.4% |
14.4% |
14.4% |
14.4% | ||
| - medicare tax rate for employee or employer | 1.45% |
1.45% |
1.45% |
1.45% |
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| - medicare tax rate for employee and employer & self employed | 2.9% |
2.9% |
2.9% |
2.9% |
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| - combined FICA & medicare tax rate for employee or employer | 7.65% |
7.65% |
7.65% |
7.65% |
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| - combined FICA & medicare tax rate for employer plus employer or S.E. | 15.3% |
15.3% |
15.3% |
15.3% |
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| - wages subject to federal unemployment taxes | 7,000 |
7,000 |
7,000 |
7,000 |
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| - federal and state unemployment rate | 6.2% |
6.2% |
6.2% |
6.2% |
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| Pension & IRA Limitation Amounts | ||||||
| - maximum benefit from defined benefit plan | 140,000 |
160,000 |
160,000 |
165,000 |
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| - maximum contribution to a defined contribution plan or Keogh | 35,000 |
40,000 |
40,000 |
41,000 |
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| - maximum 401(k) and 402(g) elective deferral | 10,500 |
11,000 |
12,000 |
13,000 |
14,000 |
15,000 |
| - minimum earnings of a highly compensated employee | 85,000 |
90,000 |
90,000 |
90,000 |
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| - section 401(k) maximum compensation limit | 170,000 |
200,000 |
200,000 |
205,000 |
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| - 414(v)(2)(B) catch up for taxpayers over
50 |
1,000 |
2,000 |
3,000 |
4,000 |
5,000 |
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| - 401(k)(11) catchup for taxpayers over
age 50 |
500 | 1,000 |
1,500 |
2,000 |
2,500 |
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| - SIMPLE retirement account compensation limit | 6,500 |
7,000 |
8,000 |
9,000 |
10,000 |
10,000 |
| - Maximum percent of compensation |
25% |
100% |
100% |
100% |
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| - Maximum SEP contribution |
25,500 |
40,000 |
40,000 |
40,000 |
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| - IRA deduction limit | 2,000 |
3,000 |
3,000 |
3,000 |
4,000 |
4,000 |
| - IRA catch-up if over 50 years of age |
n/a |
500 |
500 |
500 |
500 |
1,000 |
| - Regular IRA maximum AGI for full
deduction (with Employer Plan) |
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| --- single taxpayers and head of household |
33,000 |
34,000 |
40,000 |
45,000 |
50,000 |
50,000 |
| --- joint return |
53,000 |
54,000 |
60,000 |
65,000 |
70,000 |
75,000 |
| --- joint where spouse is included in
employer plan |
150,000 |
150,000 |
150,000 |
150,000 |
150,000 |
150,000 |
| - Roth IRA Maximum AGI for full deduction |
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| --- single and head of household |
95,000 |
95,000 |
95,000 |
95,000 | 95,000 | 95,000 |
| --- joint return |
150,000 |
150,000 |
150,000 |
150,000 | 150,000 | 150,000 |
| Transportation Deduction Limitations | ||||||
| - business mileage allowance including depreciation | $.345 |
$.365 | $.36 |
$.375 |
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| - business mileage allowance without depreciation | $.195 |
$.215 | $.20 | $.215 |
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| - charitable mileage allowance | $.14 |
$.14 | $.14 |
$.14 |
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| - medical and relocation mileage allowance | $.12 |
$.13 | $.12 |
$.14 |
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| - maximum employer paid tax free parking (monthly) | $180 | $185 |
$190 |
$195 |
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| Exclusion for Gain on Personal Residence (per
taxpayer) |
250,000 |
250,000 |
250,000 |
250,000 |
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| Foreign Earned Income Exclusion | 78,000 |
80,000 | 80,000 |
80,000 |
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| Section 179 Equipment Expense Deduction | 24,000 |
24,000 |
100,000 | 100,000 |
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| Self Employed Health Insurance Deduction percentage | 60% |
70% |
100% |
100% |
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| Threshold at which earnings do not reduce Social
Security (under 65) |
10,680 |
11,280 |
11,520 |
11,640 |
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| Social security reduction for excess
earnings (under 65) |
50% |
50% |
50% |
50% |
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| Estate and Gift Taxes |
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| - Unified credit exemption equivalent amount |
675,000 |
1,000,000 |
1,000,000 |
1,500,000 |
1,500,000 |
2,000,000 |
| - Annual gift tax exclusion for gifts of a
present interest |
10,000 |
11,000 |
11,000 |
11,000 |
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| - Family owned business deduction
maximum |
675,000 |
675,000 |
675,000 |
repealed |
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| - Maximum estate and gift tax rate (including 5%
surtax rate) |
60% |
50% |
49% |
48% |
47% |
46% |
| - Gift tax exclusion for non citizen spouses |
110,000 |
112,000 |
114,000 |
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| - Disclosure of gifts from foreign
persons (IRC 6039F) |
11,273 |
11,642 |
11,827 |
12,097 |
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| Corporate Tax Variables |
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| - Tax rate on personal holding
company income |
39.1% |
38.6% |
15% |
15% | 15% | 15% |
| - Accumulated earnings tax
(accumulations > $250,000) |
39.1% |
38.6% |
15% | 15% | 15% | 15% |
| Expatriation - Net Worth threshhold |
580,000 |
599,000 |
608,000 |
622,000 |
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| Expatriation - Average tax paid | 116,000 |
120,000 |
122,000 |
124,000 |
NOTICE: This Information is based on
a variety of sources and may not be completely current. Readers should
consult with a qualified tax professional for the most current
information.
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