Here are highlights of the compromise 10-year, $1.35 trillion tax relief package passed by both the House and Senate.
REBATE CHECKSTreasury Department to mail taxpayers checks beginning this summer: $300 for an individual, $500 for a single parent and $600 for a married couple.
TAX RATESRate cuts begin effective July 1, 2001.New 10 percent tax rate applies to first $6,000 of taxable income for single people, $12,000 for married couples filing jointly.Top 39.6 percent rate drops to 35 percent by 2006. Other rates drop gradually by 2006 from 36 percent to 35 percent; 31 percent to 28 percent; 28 percent to 25 percent.15 percent rate remains the same.Income limits on itemized deductions adjusted upward beginning in 2006.Personal exemption phase-out repealed gradually beginning in 2006.
CHILD CREDITChild 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 earning more than $10,000 could claim a credit of 10 percent of earnings, rising to 15 percent over time, above that income level. They cannot claim the credit now. ^MARRIAGE PENALTYStandard deduction for married couples gradually raised so that 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 percent 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.Income limit for earned income tax credit expanded by $3,000, fully phased in by 2008.
ESTATE TAXTax repealed in 2010.Top 55 percent rate immediately dropped to 50 percent, eventually to 45 percent.Current $675,000 individual exemption raised to $1 million in 2002,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 percent.
RETIREMENTTax-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. ^EDUCATIONMaximum $5,000 deduction for higher education tuition 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.
© MMI The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed