ERMUSR MISC. ISSUES 01-13-2004 - Laserfiche WebLink

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4 Tax Changes in 2004 Additional tax relief and savings incentives take effect ax rules are changing in 2004, affecting your up. People who turn 62 in 2004 will have to wait unt personal finances and your business. Here's a they are age 65 and 10 months to get full benefits, rundown to help you with tax planning. two months later than folks who turned 62 in 2003. The Medicare Part B premium will cost$66.60 a Saving More for Retirement month in 2004, up by$7.90. You'll be able to save more income for retirement. The cap on payins to 401(k), 403(b) and 457 plans Health Care Revisions rises to $13,000 in 2004. Workers born prior to 1955 Starting in May 2004, seniors will be able to buy a can contribute an additional $3,000. Medicare-sanctioned discount card for$30 or less. Workers with SIMPLE plans (Savings Incentive Discounts will be 10%-25% off normal prescription Match Plan for Employees), used by self-employeds prices. In 2006 the card will be replaced by Medicare and employees of small businesses, have a payin limit drug coverage. The plan has a$35 monthly premium, of$9,000,or$10,500 if born before 1955. a $250 deductible and other restrictions. Individual retirement account(IRA)deductions Health saving accounts(HSAs)will get their start phase out at higher in 2004. These accounts can be set up by individuals income levels for tax- LESS TAX,MORE TO SPEND or employers, but benefits are limited to folks coverec payers in company re- 15.5% by high-deductible policies, and account owners can- tirement plans. The not have basic health insurance. phaseout starts at 14.0% The minimum allowable deductible to qualify for $65,000 of adjusted 1z 5% a HSA is $2,000 for family coverage and $1,000 for gross income(AGI) self-only coverage. Contributions to HSAs are limited for couples and ends 11.0% Total Taxes as% +„ to $5,150 for families and $2,600 for self-only. HSA at$75,000. For sin- of Personal Income payins are tax deductible,and account earnings are glen,it starts at 9.5%1 997 1998 1999 200D 2001 2002 2003 2004 tax free,as are withdrawals if used for medical bills. $45,000 and ends at so' s:BEA.SiPlingm Forecasts Unused amounts can be carried over to the next year $55,000.A deduction can be taken for a payin for a spouse not in a plan if Energy Tax Breaks AGI is less than$150,000. Congress is likely to approve an energy bill loaded with tax incentives to develop domestic energy re- Social Security sources and to reduce energy usage. The Social Security wage base inches up to $87,900, Homeowners are expected to get tax credits of ui a $900 hike. Tax rates stay the same: 6.2% on employ- to $2,000 a year for energy-saving improvements and ers and employees for Social Security, 1.45% on each builders and manufacturers will get tax breaks for en for Medicare. The Medicare tax applies to ALL ergy efficient homes and appliances. Tax breaks for wages. The tax on self-employeds is 15.3% on the the purchase of hybrid vehicles will be increased. first$87,000 and 2.9% above that. Energy producers will get bigger tax breaks for of Social Security beneficiaries will see a 2.1% in- and gas exploration,production from marginal wells, crease starting with their January checks. energy infrastructure improvements and alternative The earnings limits for beneficiaries are confus- energy sources such as ethanol,wind and biodiesel. ing.Those between ages 62 and 65 and four months can earn $11,640. For each$2 earned above that,$1 of Bigger Travel Deductions benefits is lost.Those who will be age 65 and four The standard allowance for business driving goes up t months in 2004 can earn$31,080 until they reach that 37.5¢ a mile in 2004. And in a further easing,taxpayer age. For each$3 earned over that,benefits drop by$1. can take the standard mileage rate on fleets of as man There is no cap on earnings for people age 65 and as four vehicles used concurrently in a business. four months or older. The rate for medical travel and moving expense: Normal retirement age for Social Security goes rises to 14¢ per mile, a 2¢ hike. 8 I The Kiplinger Letter • KiplingerForecasts.com