Joe R. Chhabria, CPA

TAX TIPS - 2001
Tax Planning 2001-2002 

						

							
				

				

					
						
					
					
						
					
				

			

			
FREE BOOKLET ON TAX AND FINANCIAL PLANNING

		

		

		
		

			
QUICK REFERENCE

		

		

			

				

					
					Auto depreciation (max.)
					
					
					
					Social Security earnings limit
					
					
					
					
					
				

				

					
					
					
						

							
$ 10,680
no limit

						

							
					
				

				

					
						
    
							
  • 1st year
							
  • 2nd year
							
  • 3rd year
							
  • thereafter
						

							
					
				

				

					
						
$ 3,060
$ 4,900
$ 2,950
$ 1,775

							
					
						
    
							
  • under age 65
							
  • age 65 or older
						

							
					
				

				

					Federal per-diem travel rates
					
					
					
				

				

					
						
    
							
  • high-cost area
							
  • low-cost area
						

							
					
						

							
$ 201
$ 124

						

							
					
				

				

					Personal exemption:
					
					$ 2,900
					
				

				

					Standard mileage rates:
					
					
					
				

				

					
						
Automatic Exemption 
from Estate Tax

							
					
					
				

				

					
						

							$ 675,000

							
					
				

				

					
						
    
							
  • cars used in business
							
  • cars used for charity
							
  • cars used for moving or medical transport
						

							
					
						
$ 0.345
$ 0.140

$ 0.120

							
					
				

				

					Wage base: Social Security tax
					
						

							$ 80,400

							
					
				

				

					
					Taxable wage base: Medicare
					
						

							no limit

							
					
				

				

					Phaseout of personal exemption starts with income at:
					
				

				

					
					SEP's cover employees who earn
					
							$ 450
					
				

				

					
						
    
							
  • couple (AGI)
						

							
					$ 199,450
					2001 deferral limits-401(K), SEPs:
					$ 10,500
					
				

				

					
						
    
							
  • single (AGI)
						

							
					$ 132,950
					
					
					
				

				

					2001 tax rate on luxury cars:
					
						

							4 %

							
					
				

				

					Phaseout of itemized deduction affects taxpayers with income over:
					
					
				

				

					Luxury cars defined as costing*
					$ 38,000
					
					
				

				

					
						
$ 132,950

							
					
					
					
					
					
				

				

					*Items costing up to $1000 may be added    without increasing the tax.
					
				

				

					
					
					
					
					
					
					
					
					
					
					
					
					
					
					
					
					
				

			

		

		

			
			

			

				

					
						

							
INCLUDED IN INCOME

						

							
				

				

					
						
    
							
  • wages
    • 
							
  • salary
    • 
							
  • fees
    • 
							
  • tips
    • 
							
  • commissions
    • 
							
  • business profits
    • 
							
  • gain on sale of real estate, securities,
and other property
    • 
							
  • interest received
    • 
							
  • rents collected
    • 
							
  • dividends
    • 
							
  • royalties
    • 
							
  • alimony and separate- maintenance
payments
    • 
						

							
					
						
    
							
    
								
  • sick pay
								
  • annuities and pensions, to the extent the return exceeds investment
							
    • 
							
  • income from an interest in an estate
or trust
    • 
							
  • prizes and awards
    • 
							
  • some fringe benefits
    • 
							
  • up to 85% of social security benefits
    • 
							
  • gambling winnings net of losses
    • 
							
  • strike benefits
    • 
							
  • unemployment compensation
    • 
							
  • hobby income
    • 
							
  • barter income
    • 
							
  • illegal income
    • 
						

							
				

			

			

			
			

				

					
						

							NOT INCLUDED IN INCOME
							
 
						

							
				

				

					
						
    
							
  • gifts and inheritances
    • 
							
  • interest from certain state and
municipal bonds (or received by mutual funds that hold them)
    • 
							
  • employer reimbursements for business
expenses (that you don't deduct)
    • 
							
  • returns of capital
    • 
							
  • gain up to $500,000 on sale of primary
residence (under certain conditions)
    • 
							
  • some or all of Social Security benefits
    • 
							
  • employer-paid health coverage for
immediate family
    • 
							
  • compensation for sickness or injury
    • 
							
  • child support
    • 
						

							
					
						
    
							
  • welfare
    • 
							
  • accident-and health-insurance proceeds
    • 
							
  • life-insurance proceeds (estate
tax may apply)
    • 
							
  • veterans benefits
    • 
							
  • scholarships and fellowships to a degree candidate in 2000 if used for certain purposes
    • 
							
  • 14 days' rental income from house
or vacation home
    • 
							
  • interest on Education Savings Bonds
    • 
							
  • dependent-child wages up to $2,800
    • 
							
  • child's investment income up to
$700
    • 
							
  • federal income-tax refunds
    • 
						

							
				

			

			

			

		

			











2001 INCOME TAX RATES















Taxable Income







Tax Rate (%)





Total Tax at Breakpoint





Phase-out Range of Personal Exemptions









0 - 45,200





15*



$   6,780 





$ 199,450 - 321,950







45,201 - 109,250



27.5

24,394 









Married, Filing



109,251 - 166,500



30.5

41,855 









Jointly



166,501 - 297,350



35.5

88,307 









297,351 - and up



39.1

















0 - 36,250



15*

5,438 






							 $ 166,200 - 288,700







36,251 - 93,650



27.5

21,223 







Head of 

93,651 - 151,650



30.5

38,913 







Household

151,651 - 297,350



35.5

90,636 









297,351 - and up



39.1



















0 - 27,050



15*

4,058 






							$ 132,950 - 255,450







27,051 - 65,550



27.5

14,645 







Unmarried

65,551 - 136,750



30.5

36,361 







Individual

136,751 - 297,350



35.5

93,374 









297,351 - and up



39.1

















0 - 22,600



15*

3,390 





$ 99,725 - 160,975







22,601- 54,625



27.5

12,197 







Married,
Filing 

54,626 - 83,250



30.5

20,928 







Separately

83,251- 148,675



35.5

44,153 









148,676 - and up



39.1

















0 - 1,800



15

270 









1,801 - 4,250



27.5

944 









Estates



4,251 - 6,500



30.5

1,630 









& Trusts



6,501 - 8,900



35.5

2,482 









8,901 - and up



39.1










						


*In 2001, you receive the benefit of the new 10% bracket in the form of a credit and refund.
							
EEXEMPTION PER PERSON: $2,900

							

							








							2001 STANDARD DEDUCTION







 


						

							
Under 

										age 65

						

							

Age 65 or over







Married,
Filing Jointly

$

7,600

8,500

Standard deduction for an individual claimed as a dependent by another cannot exceed the greater of $750 or the dependent's earned income + $250, up to the normal standard deduction.  If one spouse filing separately itemizes, the other gets no standard deduction.





Head of
Household



6,650

7,750





Unmarried
Individuals



4,550

5,650





Married,
Filing Separately



3,800

4,250






						
    

						
    
							
  • Taxpayers who are legally blind get an extra $900 if married, $1,100 if single.
						

						



							








							
CREDITS

						















Earned-Income Credit



Refundable credit can be as high as about $4,000.  Earnings limit for eligibility is $28,281 for those with one qualifying child, $32,121 with two or more.  Credit phases out as income rises.  The credit is up to a few hundred dollars for couples with no children.  Definition of earnings for EIC eligibility purposes is still strict.  Social Security numbers are needed for all.















Dependent Care Credit



For care for your child under age 13 or disabled dependent while you work: 30% of up to $2,400 for one child, and of up to $4,800 for more than one.  (Credit rises and expands after this year.) 















Credit for Elderly Disabled



Credit is 15% of qualifying income; available to permanently disabled who are age 65 or over.




		

		










		


		

			

				FREE BOOKLET ON TAX & FINANCIAL PLANNING
					
For more tips please contact us by e-mail or phone to get your free booklet on tax and financial planning.  Topics covered in this booklet include: 

					
    
						
  • Summary of 2001 changes
						
  • Guidelines and strategies
						
  • Alternative Minimum Tax (AMT)
						
  • Tax & financial planning for your family
						
  • Investments
						
  • Retirement
						
  • Real estate
						
  • Estate & Gift Taxes
						
  • Business Income Taxes
					

						
				
				
			

			

				Tax Planning 2001-2002
				
			

			

				
				
				
			

		

		

			



					
				



		

		

			

			

			 


			

				
			

			

				

					
						

							
Site maintained by Mark Chhabria 

									
									If you have questions about the content of this site or experience difficulty viewing these pages, please contact markchhabria@yahoo.com