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2004
Tax Act
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2004 |
2005 |
Single |
$4,850 |
$5,000 |
Married,
filing joint |
$9,700 |
$10,000 |
Married,
filing separate |
$4,850 |
$5,000 |
Head
of Household |
$7,150 |
$7,300 |
65
or older or Blind |
$1,200 - Single, HOH |
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$950 - MFJ (each) |
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Personal
and Dependency Exemption: |
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$3,100 |
$3,200 |
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In 2004, the marriage penalty
will be eliminated for many married taxpayers by adjusting their
standard deduction and the 15% tax bracket to twice the amount
for single taxprayers to $9,500. From 2005-2008, the standard
deduction and the 15% tax bracket for married couples will be
based on the same applicable percentages that are scheduled to
go into effect under the 2001 Act, which appears to gradually
raise the amounts to double the single rates by 2008.
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For 2004, the amount used to reduce
the net unearned income reported on the child's return that is
subject to the "kiddie tax", is $800. (This amount is
the same as the $800 standard deduction amount.
First $800 |
Not Taxed |
Next $800 |
Taxed at child's rate |
Income greater than $1,600. Taxed
at parent's highest bracket until the child reaches age 14.
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For 2003 and 2004, the maximum
credit you can claim is $1,000 for each qualifying child under
age 17. The credit is phased out beginning at modified AGI levels
of $110,000 - MFJ ($75,000 - HOH, $55,000- MFS).
The qualifications for claiming
the additional child tax credit have been expanded to include
taxpayers with 1 or more qualifying children when the taxpayer
is not able to claim the full child tax credit for each child.
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For year 2004, the maximum amount
of eligible day care expenses paid for dependent(s) under age
13 of working couples will increase from $3,000, if there is one
qualifying child (from $4,800 to $6,000, if there are 2 or more)
and the maximum credit is 35%. The phase-down of the credit begins
as income rises to a maximum credit percentage of 20% after income
exceeds $43,000.
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The deduction for health insurance
premiums and qualified LTC insurance for the self-employed from
your trade and business income has been accelerated to 70% for
2002 and 100% for 2003 on.
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Capital gains rates fall from
20% to 15% for higher income earners for qualifying property sold
between May 6, 2003 through December 31, 2007.
For lower income taxpayers, the
current 10% rate falls to 5%. In 2008, there will be a zero percent
capital gains for lower income taxpayers. Then, on January 1,
2009, the sunset provisions spring to life (maybe) and capital
gains taxes will increase to prior levels.
The big diference between the
highest tax rate of 35% and the highest captial gains rate of
15% makes tax planning even more important. The five-holding period
created by EGTRRA is effectively repealed.
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