November 2002

BRIEFS:

An early peek at Internal Revenue Service’s 2003 annual cost-of-living adjustments

While the Service will not release next year’s brackets until later this year,

information obtained from key government consumer price index report that was

just released predict that the top 38.6% federal income-tax bracket will not kick in unless taxable income is more than $ 311,950 (up from the 2002 threshold of $ 307,050).

The government reported the CPI rose 1.8% for the twelve months through August, 2002, but should the government revise its inflation report, these tax adjustments could change.

The standard deduction would be $ 7,950 for joint returns (up from $ 7,850) and for singles it would be $ 4,750 (up from $ 4,700)

Unfortunately, the Alternative Minimum Tax is not so indexed to inflation and therefore its provisions each year hit more taxpayers.

Slightly benefiting by cost-of-living adjustments are the two controversial backdoor

tax (because they raise taxes without raising rates)increases that affect upper-income taxpayers, namely the limit on itemized deductions and the personal-exemption phase-out.

The limit on itemized deductions will kick in once income reaches $ 139,500 in 2003 (up from $ 137,300 in 2002). For someone that files married filing separate, the threshold is

$ 69,750 for 2003(up from $ 68,650 in 2002)

The phase-out of personal exemptions begin when adjusted gross income exceeds

$ 209,250 in 2003(up from $ 206,000 in 2002) for joint return filers and $ 139,250 in 2003

(up from $ 137,300 in 2002) for most singles.

 

IRS Mileage-rate allowances will decline slightly in 2003

The IRS has announced that the optional standard rate will drop to $ .36 cent per mile next year from the 2002 rate of $ .365.

Furthermore, the standard rate for using your car for medical purposes will decline to $ .12 per mile in 2003 (down from the $ .13 rate in 2002)

However, the standard rate for using your car for giving service to a charity will remain at $ .14 per mile (same as the $ .14 rate in 2002)

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