Jordan Goodman is the author of Everyone's Money Book, available at 888-201-6300. This is the third edition of the book. You can also visit his Web site at www.moneyanswers.com. He talks with us on Thursday mornings.

June 5, 2003

"How the 2003 Tax Law Affects Families"

Child tax credit raised: The child tax credit, which has been $600, is immediately raised to $1,000 per child, effective retroactively to January 1, 2003. This applies if you claimed a dependent child of 17 years of younger on your 2002 tax return. It also applies to married couples with adjusted gross incomes up to $110,000 and single parents with incomes up to $75,000. If your income is over those limits, you cannot claim this credit, which reduces your taxes, dollar for dollar. If you did not pay taxes in 2002 because your income was too low, you will not get the credit either. Because the credit is retroactive, the Treasury is going to be sending out checks for $400 per child by the end of July to about 25 million Americans.

Marriage Penalty eliminated: For many years, a quirk in the tax law has caused couples to pay more than singles, everything else being equal. The marriage penalty was going to be eliminated over several years, but the new law accelerates it to now. The new law accomplished this by raising the standard deduction so that the deduction for couples is now twice that of singles. Also, the 15% tax bracket is widened up to $58,000, so income by a couple is taxed at the same rate as for a single.

Alternative Minimum Tax Exemption expanded: The dreaded AMT is the tax that you pay if you use too many tax-saving deductions and credits. Each year, it had been ensnaring more and more Americans, and in a few years, was going to be hitting as many as 30 million taxpayers if nothing was changed. The new law raises the AMT exemption amount to $58,000 for married couples and $40,250 for singles, so fewer people will get hit by the AMT than would have been under the old law.

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