Tuesday night, President Bush officially unveiled his hopes, plans, and promises for a new budget and a new direction in the nation's economy. The centerpiece of his speech before Congress and to the nation was his tax cut plan.
Under the Bush plan:
- All federal income tax rates will be cut from the five current levels (15%, 28%, 31%, 36%, and 39.6%) to four, lower levels (10%, 15%, 25%, and 33%).
- The Child Tax Credit will be increased from $500 to $1000 over a period of five years, and the income ceiling for claiming this credit will be raised from $110,000 to $200,000.
- The so-called marriage penalty will be eased by providing a deduction of up to 10% of the lower-earning spouse's income.
- Estate tax will be entirely repealed over a period of eight years.
- Research and Development Tax Credit will be made a permanent part of the tax code.
- Charitable deductions will be allowed for non-itemizing taxpayers.
- Caps on corporate charitable contributions will be raised.
- Education IRA contribution limitations will be increased.
- Penalty-free withdrawals from IRAs made by people over age 55 for charitable donations will be allowed.
New, lower tax rates will affect nearly every taxpayer if the Bush plan is implemented. See how the rates will affect you by studying the chart in an article at msnbc.com.
If you already know (or can estimate) the amounts that will appear on your 2000 tax return, you can plug in those numbers in a calculator at the Kiplinger Web site and find out how much the Bush plan will save you, not just next year, but in five years, when the entire tax plan has been implemented.