Until now the most you could contribute to a traditional IRA account or a Roth IRA account has been $2,000 per year. Starting in 2002 you'll be able to sock away $3,000 if you are under 50 and $3,500 if you're over. In 2005 a person under 50 can earmark $4,000; a person over 50, $4,500. In both 2006 and 2007 the older group can put aside an additional $500; in 2008 the limits are $5,000 and $6,000, and then will be adjusted for inflation in $500 increments.
401(k) amd 403(b) Plans
In 2002 if you are under 50, the maximum you can defer is $11,000 per year. Those over 50 can defer $12,000. The under-50 limit increases by $1,000 and the over-50 limit jumps by $2,000 each year through 2006 (when the limit will be adjusted for inflation). Note to the self-employed: There are also increases to SEP-IRA and Keogh plan limits.
Currently, the estate tax exemption is $675,000. In 2002 it will rise to $1 million. It will be $1.5 million in 2004 and 2005, $2 million from 2006 through 2008, and $3.5 million in 2009. Beginning in 2010 (when the estate tax is repealed), the top gift-tax rate will equal the top individual income tax rate of 35 percent.
As of 2002, you'll be able to contribute up to $2,000 per child (up from $500) to an education IRA. Not only will you be able to save more but, starting next year, you'll also be able to put your contributions and earnings toward tuition, tutoring costs and other expenses for grades K through 12, as well as college. For these reasons, I have switched from not liking education IRAs to liking them very much. And for the first time, beginning in 2002, you can deduct up to $3,000 a year (rising to $4,000 in 2004) of any money you spend on qualified higher-education expenses directly from your income on your tax return, if you earn $65,000 or less a year as a single filer or $130,000 or less as joint filers.
The Marriage Penalty
If you and your fiancée were hoping the marriage penalty would be lifted before the wedding, plan on a long engagement. The increase in the standard deduction for joint filers won't be phased in until 2005 (when it moves to 174 percent of the standard deduction for single filers). The deduction will be exactly twice that of single filers in 2009.
Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.