Tax Bill, by Numbers
Highlights of the 10-year, $1.35-trillion tax relief package.
Rebate checks:
* Treasury Department to mail taxpayers checks beginning this summer: up to $300 for an individual, $500 for a single parent and $600 for a married couple.
Tax rates:
* Rate cuts begin July 1.
* New 10% tax rate applies to first $6,000 of taxable income for single people, $12,000 for married couples filing jointly.
* Top 39.6% rate drops to 35% by 2006. Other rates drop gradually by 2006 from 36% to 33%; 31% to 28%; 28% to 25%.
* 15% rate remains the same.
* Income limits on itemized deductions adjusted upward beginning in 2006.
* Personal exemption phase-out repealed gradually beginning in 2006.
Child credit:
* Child credit rises from $500 to $600 effective in 2001, meaning it could be claimed on next year’s tax forms. Rises to $700 in 2005, $800 in 2009 and $1,000 in 2010.
* Taxpayers making more than $10,000 could claim a credit of 10% of wages, rising to 15% over time, above that income level.
Marriage penalty:
* Standard deduction for married couples gradually raised so it is equal to twice that of single taxpayers. If in effect this year, the deduction would be $9,100 instead of $7,600 for a married couple.
* 15% tax bracket gradually enlarged so it applies to more of a married couple’s income, equal to twice that of singles. If fully in effect this year, the lowest tax rate would apply to $54,100 of a couple’s income instead of $45,200.
Estate tax:
* Tax repealed in 2010.
* Top 55% rate immediately cut to 50%, eventually to 45%.
* Current $675,000 individual exemption raised to $1 million in 2002, $1.5 million in 2004, $2 million in 2006, $3.5 million in 2009.
* Tax retained on certain gifts but rate reduced to 40%.
Retirement:
* Tax-favored contribution limits for Individual Retirement Accounts and Roth IRAs gradually raised from $2,000 to $5,000. No change in income limits.
* Tax-deferred contribution limits for 401(k)-type plans gradually increased from $10,500 to $15,000.
Education:
* Maximum $5,000 deduction for higher education tuition is lowered to $2,000 for incomes between $130,000 and $160,000. Phases out above that level.
* Limitation on deductibility of student loan interest removed.
* Contribution limit for tax-favored education savings accounts raised from $500 to $2,000.
