Tax News Archive:
Tax Changes by the IRS for 2001
Following are some Tax Changes by the IRS for tax year 2001. The changes are in keeping with the view that Americans are making more money now than the previous years. There are some tax breaks while on the other hand the income threshold subject to taxes has been increased.
- Foreign earnings exempt from US taxes for Americans working abroad is increased to $78,000.
- $4200 more of your income will be subject to social security taxes this year making it $80,400 in 2001 up from $76,200 in 2000.
- $100 more is added to the investment income of a child under the age of 14 this year making it $1500 that will be exempt from being taxed at their parents rate. The first $750 is tax-free and the second $750 is taxed at the childs tax rate. In 2000, the limit was $1400.
- You wont have to withhold any Social Security and Medicare taxes from your household employee if you pay him/her less than $1300 in 2001.
- Up to $2500 interest paid on student loan payments in 2001 is deductible, up from $2000 in 2000.
- Standard mileage rate for business use of a car is 34.5 cents in 2001. It used to be 32.5 cents in 2000 but with the rise of the gasoline prices in the U.S., IRS decided to adjust it for 2001.
- Capital gains tax on investments held more than 5 years is lowered to 8% from 10% previously for people in the 15% tax bracket.
- Contribution limits on "457 plans" is upped to $8500 in 2001 previously it was $8000. The limit for SIMPLE plans is now $6500, an increase of $500 from the previous years. For self-employed Keogh plans the new contribution limit is $35,000 in 2001 previously it was $30,000.
- Individual who are covered by a employer retirement plan just had their income eligibility limit raised to claim deductions on their traditional IRAs from $62,000 in 2000 to $63,000 in 2001 (joint filers) and $42,000 in 2000 to $43,000 in 2001 (single filers).
- Small businesses and self-employed individuals can now deduct up to $24,000 for equipment costs in 2001.
- Excise tax on luxury cars with cost upwards of $35,000 is reduced to 4% from 5% in 2000.