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For What's New on Form 1040, Click HERE.

Individual Tax Rates

Rates apply to incomes exceeding the following levels in 2002

Filing Status 15% 28% 31% 36% 39.6%
Single -
Married-Joint -
Married-Separately -
Head of Household - $ 33,950 $ 87,700 $ 142,000 $ 278,450

To determine your tax liability, use the following:

For Individuals filing Single (2002)

If taxable income is: The tax is:
Not over $25,350.....  
Over $25,350 but not over $61,400...  
Over $61,400 but not over $128,100...  
Over $128,100 but not over $278,450...  
Over $271,050...  

For Married Filing Jointly (2002)

If taxable income is: The tax is:
Not over $41,200.....  
Over $41,200 but not over $99,600...  
Over $99,600 but not over $151,750...  
Over $151,750 but not over $271,050...  
Over $271,050...  

Individual Alternative Minimum Tax (AMT)

The tax rate is 26% and additional computations must be made by adding back to regular taxable income certain deductions and exceptions to ensure that you pay the minimum tax. The rate increases to 28% for Alternative Minimum Taxable Income (AMTI) in excess of $175,000.

Capital Gains Rate

Under the new law, the minimum long-term rate has been reduced from 28% to 20% on sales held for more than 12 months. The 18 month holding period and the 28% rate has been repealed.



Holding Period Maximum Tax Rate
12 months or less 39.6%
More than 12 months 20.0%*

* 8% for individuals in the 15% bracket.

Home Sale Exclusion

Up to $500,000 ($250,000 if single) of home sale profit is tax-free on principal residences sold after May 6, 1997, if certain requirements are met. This profit exclusion may be available every two years. No loss is allowed for a home sale that results in a loss.

Standard Deductions - update to follow

The standard deduction for 1997 increases to $4,150 for single individuals, $6,900 on joint returns and $6,050 for Heads of Households.

Itemized Deductions - update to follow

Taxpayers whose adjusted gross income exceeds $121,200 will have their itemized deductions reduced. Deductions (other than medical, casualty, theft losses and investment interest) are reduced by 3% of the amount of adjusted gross income in excess of that income of $121,200. Taxpayers cannot lose more than 80% of these itemized deductions. This provision equates to a rate increase of about 1% on the higher income.

Charitable Contributions

In 1998, a canceled check is no longer sufficient as proof of a contribution made. Contributions of $250 or more require a receipt. If an item of value or service is provided, the charity must notify you of its value if the amount is $75 or more. As in previous years, contributions are limited to between 20% and 50%, depending on the type of property given and the type of organization given to. Non-deductible contributions may be carried forward up to five years.

Exemptions and Their Phase-Out - update to follow

The $2,650 exemption phases out gradually for single taxpayers whose adjusted gross income is in excess of $121,000 and for joint filers with incomes in excess of $181,000. The provision equates to about a 1/2 percentage point increase in the marginal tax rate for each exemption claimed.

Pension Plans

The 15% tax on excess distributions (over $160,000) is repealed after January 1, 1997.

Social Security Tax

In 1999, employees are subject to tax for Social Security and Medicare:

On Wages Base Tax Amount Rate in Excess
$0 to $ 0 7.65% Social Security and Medicare
$ + Over $ 1.45% Medicare Only

Self-employed taxpayers pay twice as much tax as that shown above. However, self-employed taxpayers may deduct one-half their Social Security tax liability for income tax purposes. This results in an equivalent tax being paid.

Estimated Tax Payments

For 1998, a tax penalty can be avoided if equal installment tax payments are made that are equal to 100% of 1997's tax liability. For 1999, that percentage is 100% for AGI under $150,000 and 105% for AGI over that amount.

401 (K) Deduction

The maximum deductible payment to a 401 (K) plan in 1998 is $10,000

Paperwork and Information

The following information should be gathered prior to preparation of filing you 1997 tax returns.

  1. All wage reports (W-2)
  2. All Interest and Dividend and Miscellaneous Income (including all 1099s, 1087s and year-end brokerage statements). Include all tax exempt interest income.
  3. All K-1 Forms, if applicable
  4. Social Security Benefits (SSA-1099), if applicable
  5. List of charitable contributions with receipts (see above rule)
  6. List of other deductions and back-up, if available

For information on our tax preparation and planning services, please contact us by phone, e-mail, or using the IRF below. For information on the '97 Taxpayer Relief Act, click the button labeled Tax Tips and Advice on the frame below (if showing) or click here.

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Last modified: November 15, 2002