Taxpayer Refund and Relief Act of 1999

esecretlogo Taxpayer Refund and Relief Act of 1999

A.. Reductions in Individual Income Tax Rates:

All marginal income tax rates (15%, 28%, 31%, 36%, 39.6%) are to be reduced by 1%.
The reduction of the 15% rate to 14% is phased in over 3 years (14.5% in 2001 and 2002) (14% in 2003).
Reduction in all other marginal tax rates to be effective in 2005.
Beginning in 2006, the 14% income tax bracket is widened by $3,000.

B.. Reduction in AMT Rates

C.. Marriage Penalty Relief Provisions

The basic standard deduction for married persons filing a joint return is increased to twice the basic standard deduction for a single individual, to be phased in over 5 years beginning in 2001 and becoming fully effective in 2005.

( For 1999 the joint standard is $7,200 and the single is $4,300 )

The size of the lowest tax bracket (currently 15%) for a married couple filing jointly is to be increased to twice the size of a corresponding bracket for a single individual phased in over 4 years beginning in 2005.

( For 1999 the 15% bracket for joint returns is $43,050 and the single is $25,750 )

D.. AMT Phase Out

An individual can offset for years after 1998 his entire regular tax liability (without regard to the minimum tax) by his personal non-refundable credits.

( At present, the above provision is only applicable for 1998 )

E.. Individual Capital Gains

Maximum rate for adjusted net capital gains reduced from 20% to 18% and from 10% to 8% if taxed at lowest individual rate. Unrecaptured Section 1250 gain is reduced from 25% to 23%. All reduced rates are effective for years beginning after December 31, 1998.
Inflation indexing for common stock of C corporations and tangible property that are capital assets or property used in a trade or business.
The inflation adjustment is applicable to assets whose holding period begins after December 31, 1999. Inflation adjustments are computed by multiplying the taxpayer's adjusted gross basis in the indexed asset by an inflation adjustment percentage.
An individual holding an indexed asset on January 1, 2000 may elect to treat the indexed asset as having been sold on such date for its fair market value, and having been reacquired for that value. If an election is made, any gain is recognized and any loss is disallowed.

F.. IRAs

Maximum IRA contribution limit is increased from $2,000 as follows: $3,000 in 2001-2003; $4,000 in 2004-2005; $5,000 in 2006-2008, with indexing thereafter.
AGI phase out limits for Roth IRAs (presently $95,000-$110,000 single and $150,000-$160,000 joint) increased to $100,000-$110,000 single and $200,000-$210,000 joint starting January 1, 2003.
The Roth IRA AGI conversion limit (presently $100,000) increased to $200,000 for joint filers and $100,000 for all other filers for years beginning January 1, 2003.

G.. Student Loan Interest

Beginning in 2000, the deduction for student loan interest ($1,500 in 1999; $2,000 in 2000; and $2,500 in 2001 and thereafter) will be phased out ratably for individual filers with modified AGI of $45,000-$60,000 and joint filers with modified AGI of $90,000-$105,000.

( At present the phase out is $40,000-$55,000 single and $60,000-$75,000 joint )

H.. Expansion of Education Savings Accounts

Name of Education IRAs changed to Education Savings Accounts as of date of enactment.
Annual education IRA contribution limit increased to $2,000 for years beginning after 2000.
For years after December 31, 2000, the definition of qualified education expenses is expanded to include qualified elementary and secondary education expenses (kindergarten through grade 12th) at a public, private or religious school.
Although contributions to an education IRA generally may not be made after the designated beneficiary reaches 18, contributions may continue to be made to an education savings account in case of "special needs" beneficiaries up to age 30.
After December 31, 2000, a taxpayer may claim a Hope Credit or Lifetime Learning Credit for a taxable year and to exclude from gross income amounts distributed (both principal and earnings portions) from an education savings account on behalf of the same student as long as distributions are not used for the same educational expenses for which a credit is claimed.

I.. Health Care Insurance

An above-the-line deduction allowed for a percentage of the amount paid for insurance which constitutes medical care as follows: 25% in 2002-2003; 50% in 2004-2005; 100% in 2006 and thereafter.

J.. Estate and Gift Taxes

In 2003 through 2006, all estate and gift tax rates are reduced by 1%. In 2007, all estate and gift tax rates are reduced by 1.5%. In 2008 all estate and gift tax rates are reduced by 2%.
Beginning in 2009, the estate, gift and GST taxes are repealed, and carryover basis applies for transfers from estates in excess of $ million. The first $3 million of transfers to surviving spouses will receive a step up in basis.

K.. Acceleration of 100% Self-Employed Health Insurance Deduction

Beginning in 2000, the deduction for health insurance premiums and qualified long-term care expenses of self-employed individuals increases to 100%.

L. Section 179 Expenses

Section 179 is increased to $30,000 for taxable years beginning in 2000 and thereafter without the present law phase-in rule.

Under present law the $19,000 amount is increased to 420,000 in 2000, to $24,000 in 2001-2002, and $25,000 in 2003 and thereafter.