|Income Tax Rates
The changes provided in the Economic Growth and Tax Relief Reconciliation Act of 2001 are many and far-reaching. The most notable and most talked about provision is the sweeping change of the tax rate brackets. This change is also one of many compromises within the bill.
President Bush's initial version called for a cut to a four-bracket system, but the final bill provides for a six-bracket system. The new 10% tax rate is effective January 1, 2002. Gradual reduction in all the other rates will be gradual, starting July 2001. The final 25%, 28%, 33%, and 35% levels won't be reached until the 2006 tax year.
The new 10% rate will be effective for the 2002 tax year. For years 2002-2007, the 10% rate will apply:
- to the first $12,000 for Married Filing Jointly,
- the first $10,000 for head Of Household,
- and the first $6,000 for Single.
These income levels will increase to $14,000, $10,000, and $7,000 after 2008. This new rate will not take effect until the 2002 tax year, but the bill provides an advance credit/refund for the 2001 tax year, an incentive to "jump start" the economy.
Always consult us for details and assistance before applying this general information to your specific situation.
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