Important Tax-Act Dates for Taxpayers to Know
Oct. 8, 2001 The new tax act presents a confusing array of phase-in and phase-out dates for various provisions. Some provisions don't begin for several years, others begin soon but end abruptly. Certified Financial Planner professionals caution taxpayers to pay careful attention to these dates. Below are some of the more important phase-in and phase-out periods arranged by date.
A new ten percent tax bracket is created, retroactive to the first of 2001. This is not reflected in withholding, but rather in refund checks expected by fall. A higher exemption amount for the alternative minimum tax (AMT) also goes into effect.
The child-tax credit rises from $500 to $600.
July 1, 2001. The 28, 31, 36 and 39.6 percent income-tax brackets declines 1 percent, which will be reflected in a slight decline in withholding. The 15 percent bracket remains.
The top estate and gift tax rate drops from 55 percent to 50 percent, and the exemption amount rises to $1 million (from $675,000).
Maximum deductible contributions rise to $3,000 for individual retirement accounts (IRAs) and $11,000 for 401(k), 403(b) and salary reduction SEPs (also known as SARSEPs).
Several education provisions begin, including an above-the-line deduction for qualified higher education expenses, the raising of contribution limits for education IRAs from $500 to $2,000 a year and the exemption from income tax of the earnings distributed from college savings plans used for qualified education expenses.
The top estate and gift tax rate drops to 49 percent. The exemption amount remains at $1 million.
Maximum deductible contributions rise to $12,000 for retirement plans.
The 28, 31, 36 and 39.6 percent income tax brackets decline another one percent.
The top estate and gift tax rate drops to 48 percent, and the estate tax exemption amount rises to $1.5 million. However, the exemption amount for lifetime gifts permanently remains at $1 million, unadjusted for inflation.
Maximum deductible retirement plan contributions rise to $13,000.
The child-tax credit rises to $700. Marriage penalty relief begins, and is phased in through 2009 (higher-income married couples who itemize won't get relief). The increased exemption amount for the AMT is rescinded.
The top estate and gift tax rate drops to 47 percent, and the estate tax exemption amount remains at $1.5 million.
Maximum deductible contributions rise to $14,000 for retirement plans.
The 28, 31 and 36 tax brackets decline another one percent. The 39.6 bracket falls 2.5 percent from its 2004 rate, down to 35 percent. The limitation on itemized deductions taken by higher-income taxpayers is reduced by one-third, and is fully eliminated starting in 2010.
The top estate and gift tax rate drops to 46 percent, and the estate tax exemption amount rises to $2 million.
Maximum deductible contributions rise to $15,000 for retirement plans, and thereafter will be adjusted for inflation in $500 increments. IRA contributions rise to $4,000.
The above-the-line deduction for qualified higher education expenses ends.
The top estate and gift tax rate drops to 45 percent, and the estate tax exemption amount remains at $2 million.
IRA contributions rise to $5,000 and remain there for subsequent years.
The ten percent tax bracket will now start to be adjusted annually for inflation.
The estate tax exemption amount rises to $3.5 million.
The child-tax credit rises to $800
The federal estate tax is fully repealed. In its place begins what is essentially a capital gains tax on property when the heirs sell the property, though up to $3.4 million of that property could be sheltered from the new tax. However, the $1 million limit remains on lifetime gifts. Any excess is taxed at the top individual tax rate in place at that time.
The child-tax credit rises to $1,000.
The 2001 Economic Growth and Tax Relief Reconciliation Act expires. For example, the estate-tax and income-tax rates would revert to their old rates, unless Congress extends or otherwise modifies the act between now and then.