The Tax Relief Act reduces the lowest tax bracket from 15% to 10%. The new 10% tax rate bracket would be effective beginning with 2001. The 10% rate will apply to the first:
$6,000 of taxable income for single persons (2008 this increases to $7,000)
$10,000 of taxable income for heads of households
$12,000 of taxable income for married couples (2008 this increases to $14,000)
Tax payers would be entitled to an advanced payment credit for 2001 of 5% (the difference between the 15% rate and the 10% rate.
The follow chart summarizes the changes in the Regular Income Tax Rate Reductions
The Tax Relief Act phases out the restrictions on personal exemptions and overall limitation on itemized deductions for all taxpayers by 2010 according to the following schedule:
Reduced by 1/3 in taxable years beginning in 2006 and 2007.
Reduced by 2/3 in taxable years beginning in 2008 and 2009.
Eliminated for taxable years beginning in 2010.
The changes made by the Act will permit individuals paying estimated taxes to reduce the payment s they otherwise would make. Taxpayers with adjusted gross income (AGI) over $150,000 in the previous year must pay estimated tax on the basis of either 90 percent of the current year's liability or 110 percent of the prior year's liability. When current-year tax rates are lower than prior-year tax rates (which will occur as the Act phases in) reliance on the 100 percent safe harbor is more likely to result in the overpayment of estimated tax. Careful estimated tax planning will minimize over payments.
After 2001, the Tax Relief Act permits Holocaust survivors and heirs to exclude restitution payments from gross income.
The act expands the IRS's authority to postpone tax deadlines due to presidentially declared disasters.
COLLECTIONS & KITS