 | Income tax rates are reduced. |
The top four tax brackets have been
reduced by 1/2% and are now 27% , 30%, 35%, and 38.6%.
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The maximum annual contribution to a traditional or
Roth individual retirement account (IRA) increased to $3,000 in 2002 |
Taxpayers age 50 or older can make
additional catch-up contributions of $500.00
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The maximum contribution to 401(k) plans, 403(b) plans,
457 plans, and salary reduction simplified employee pensions (SAR - SEP's)
increased to $11,000 in 2002. |
SIMPLE contributions increased to $7,000.
Individuals age 50 or older can make additional catch-up contributions of
$1,000, if permitted by the plan, except for SIMPLE plans, which have $500
catch-up contributions.
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A maximum above-the-line deduction of $3,000 is
available for qualified higher-education expenses. |
The deduction is available for single
taxpayers with AGI not exceeding $65,000 and for married taxpayers filing
jointly with AGI not exceeding $130,000. The deduction is calculated on a
per taxpayer, not per student, basis.
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The exclusion of up to $5,250 of employer-paid
educational assistance has been extended to graduate education.
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The graduate and undergraduate education
exclusions have been made permanent.
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Rules regarding deductibility of student loan interest
have changed. |
Interest payments can be deducted even if
paid after the first 60 months of required payments. Income phase-outs
increased to $50,000-$60,000 (up from $40,000-$55,000) for single
taxpayers and to $100,000-$130,000 (up from $60,000-$75,000) for married
taxpayers filing jointly.
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