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The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) preset the tax rates for 2003. But the income brackets, as well as many other tax-related limitations, are changing based on what turned out to be a low rate of inflation in a year wrought with corporate and economic turmoil [Rev. Proc. 2002-70].
"Clip-and-Save Tax Facts" on page 4 highlights inflation adjustments for 2003 in the following categories:
* Tax rate schedules
* Standard deductions
* Personal exemptions
* Itemized deductions
Following is an overview of additional adjustments:
* Adoption assistance or credit. Employers may, through a qualified adoption assistance program, reimburse their employees tax-free for expenses incurred in the adoption of a child. The maximum amount in 2003 that an employer can exclude from an employee's income in connection with the employee's adoption of a child is $10,160.
Taxpayers with unreimbursed adoption-related expenses may be eligible for a tax credit. For 2003, the maximum credit allowed is the amount of qualified adoption expenses, up to $10,160.
Both the exclusion for employer assistance and the tax credit will phase out for taxpayers with modified adjusted gross income (AGI) between $152,390 and $192,390.
Note: Effective in 2003, the tax credit, employer assistance exclusion, and income phase-out ranges are the same for all qualifying adoptions, whether or not the child has "special needs."
* Kiddie tax. Certain …