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Job Creation and Worker
Assistance Act of 2002:
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| President Bush signed
the Job Creation and Worker Assistance Act of 2002 (HR 3090) into law on March
9, 2002. Most of the new law’s provisions become effective in 2002. But a few
benefits, including accelerated write-offs for business equipment, were made
retroactive to the 2001 tax year, which will affect 2001 tax returns that are
being filed this tax season. |
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| Business equipment:
In an effort to stimulate business investment, the new law allows businesses
to write off more of their equipment purchases in the first year. Businesses
are eligible to claim an additional first-year depreciation deduction equal to
30% of the cost of the equipment. This “bonus depreciation” applies to most
types of business property except for real estate purchased between Sept. 11,
2001 and Sept. 10, 2004. |
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| Bonus depreciation
for new purchases of cars: The new law temporarily boosts the special
ceiling on first-year depreciation for passenger autos from $3,060 to $7,660.
Because the bonus depreciation provision was made retroactive to Sept. 11,
2001, many businesses that bought equipment late last year will be eligible to
claim extra deductions on their 2001 tax returns. Those who already filed
their returns will be able to take advantage of the new benefit by filing an
amended return. |
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| Alternative minimum tax:
The new law extends several temporary tax breaks that recently expired or were
scheduled to expire this year. For individuals, the most significant is a
provision that protects most personal tax credits, including the
dependent-care credit and the Hope and Lifetime college tuition credits, from
being reduced by the alternative minimum tax. The provision that expired at
the end of 2001 was extended by the new law through the end of 2003. |
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| Medical savings accounts:
The legislation extends the pilot program for tax-sheltered Medical Savings
Accounts through the end of 2003. The program was scheduled to expire at the
end of this year. Contributions to MSAs are deductible and withdrawals are
tax-free when used to pay eligible medical expenses. |
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| “Catch-up” retirement
contributions: Beginning this year, the Tax Relief Act of 2001 allows
workers age 50 and over to make contributions beyond the normal limits to
401(k)s and similar employer retirement plans. The economic stimulus bill
allows individuals to start making these extra “catch-up” contributions at the
beginning of the year in which they’re scheduled to reach age 50. You don’t
have to wait until your birthday. For example, if your 50th birthday is Sep.
10, 2003, you’ll be able to start making catch-up contributions to your 401(k)
in January 2003. |
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| SEP plans: The new
law fixes a technical mistake in the 2001 tax act to reflect Congress’ intent
to increase the annual contribution limit for Simplified Employee Pension
(SEP) plans. As a result, the contribution limit for 2002 jumps from 15% to
25% of compensation, up to a maximum deposit of $40,000. |
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| Form 1099: The new
law will allow banks, brokers and other issuers of Form 1099 information
reports to send the year-end tax statements electronically if the recipient
consents. Your financial institution is likely to be asking for your
permission to send your 1099 online next tax season. Issuers have been forced
to send the statements by mail because the law didn’t allow for online
distribution. |
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| Teachers:
Schoolteachers who use their own money to buy classroom materials get a new
tax break. In the past, most teachers were unable to get a tax break for such
out-of-pocket expenses because job-related costs are treated as
“miscellaneous” itemized expenses, which are deductible only to the extent
they exceed 2% of adjusted gross income. Under the new law, elementary and
high-school teachers will be allowed to deduct up to $250 of supplies they buy
for their classroom each year without having to itemize deductions. Eligible
expenses include books, supplies, equipment, computer hardware and software.
The legislation authorizes the deduction only for 2002 and 2003. |
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| Education breaks: The
new law makes clear that beginning this year; families are no longer
automatically disqualified from claiming the Hope or Lifetime college tuition
credit for a student in the same year that money is withdrawn from the
student’s education savings account (formerly known as education IRAs.) The
one provision is that education savings account withdrawals can’t be used for
the same expenses for which the Hope or Lifetime credit is claimed. |
Note:
This
information was extracted from http://cpawebsite.com
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