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A SUMMARY OF 2003 INFLATION
ADJUSTMENTS IMPACTING INDIVIDUALS:
STANDARD DEDUCTIONS, EXEMPTIONS,
ITEMIZED DEDUCTION LIMIATIONS, AND TAX RATE SCHEDULES
Source: James C. Young, Ph.D., C.P.A.
Associate Professor
Department of Accountancy
Northern Illinois University
345L Barsema Hall
DeKalb, Illinois 60115
Standard Deduction Amounts. According to statute, the 1988
standard deduction amounts are used as the base. After adjustment for
inflation, the 2003 standard deduction amounts will be as follows (2002 amounts
for comparison):
2003
2002
Single individual
$ 4,750 $ 4,700
Married, filing
joint and Surviving spouse 7,950
7,850
Head of household
7,000
6,900
Married, filing
separate
3,975 3,925
Exemption Amounts. After adjustment for inflation, the 2003
exemption amount will be $3,050 (up from $3,000 in 2002). The 1989
exemption amount of $2,000 is used as the base.
Phase-Out of Exemptions. Since 1991, exemption deductions are phased-out as the taxpayer's AGI exceeds a threshold amount. All exemption amounts claimed on a return are reduced by 2% for each $2,500 (or fraction thereof) of AGI in excess of the appropriate threshold amount. The AGI threshold amounts for 2003 will be as follows (2002 amounts for comparison):
2003
2002
__________________________________________________
Phase-Out
Phase-Out Phase-Out Phase-Out
Begins
Completed Begins
Completed
When
When When
When
AGI
Exceeds AGI Exceeds AGI Exceeds AGI Exceeds
__________________________________________________
Single individual
$ 139,500 $ 262,000 $
137,300 $ 259,800
Married, filing
joint
and
Surviving spouse
209,250 331,750 206,000
328,500
Head of household
174,400 296,900
171,650 294,150
Married, filing
separate 104,625 165,875 103,000
164,250
Overall Limitation on Itemized Deductions. Total itemized
deductions otherwise allowable are reduced by 3% of a taxpayer's AGI in excess
of specified threshold amounts [§68]. The threshold amounts for 2003 will be as
follows (2002 amounts for comparison):
2003 2002
___________________
All taxpayers
except Married, filing separately $ 139,500 $ 137,300
Married, filing
separately
69,750 68,650
Tax Rate Schedules. After adjustment for inflation, the 2003 Tax
Rate Schedules are presented on the following page (for comparison, the 2002
Tax Rate Schedules follow).
2003 TAX
RATE SCHEDULES
Single [§1(c)]:
If taxable income
is: The
tax is:
Not over $6,000 .
. . . . . . . . . . . .10% of taxable income.
Over $6,000 but
not over $28,400 . . . . $600.00, plus 15% of the excess
over $6,000.
Over $28,400 but
not over $68,800 . . . .$3,960.00, plus 27% of the excess
over $28,400.
Over $68,800 but
not over $143,500 . . . $14,868.00, plus 30% of the excess
over $68,800.
Over $143,500 but
not over $311,950 . . $37,278.00, plus 35% of the excess
over $143,500.
Over $311,950 . .
. . . . . . . . . . . .$96,235.50, plus 38.6% of the excess
over $311,950.
Head of
Household [§1(b)]:
If taxable income
is: The
tax is:
Not over $10,000 .
. . . . . . . . . . . 10% of taxable income.
Over $10,000 but
not over $38,050 . . . .$1,000.00, plus 15% of the excess
over $10,000.
Over $38,050 but
not over $98,250 . . . .$5,207.50, plus 27% of the excess
over $38,050.
Over $98,250 but
not over $159,100 . . . $21,461.50 plus 30% of the excess
over $98,250.
Over $159,100 but
not over $311,950 . . $39,716.50, plus 35% of the excess
over $159,100.
Over $311,950 . .
. . . . . . . . . . . .$93,214.00, plus 38.6% of the excess
over $311,950.
Married, Filing
Joint and Surviving Spouse [§1(a)]:
If taxable income
is: The
tax is:
Not over $12,000 .
. . . . . . . . . . . 10% of taxable income.
Over $12,000 but
not over $47,450 . . . .$1,200.00, plus 15% of the excess
over $12,000.
Over $47,450 but
not over $114,650 . . . $6,517.50, plus 27% of the excess
over $47,450.
Over $114,650 but
not over $174,700 . . $24,661.50, plus 30% of the excess
over $114,650.
Over $174,700 but
not over $311,950 . . $42,676.50, plus 35% of the excess
over $174,700.
Over $311,950 . .
. . . . . . . . . . . .$90,714.00, plus 38.6% of the excess
over $311,950.
Married, Filing
Separate [§1(d)]:
If taxable income
is: The tax is:
Not over $6,000 .
. . . . . . . . . . . .10% of taxable income.
Over $6,000 but
not over $23,725 . . . . $600.00, plus 15% of the excess
over $6,000.
Over $23,725 but
not over $57,325 . . . .$3,258.75, plus 27% of the excess
over $23,725.
Over $57,325 but
not over $87,350 . . . .$12,330.75, plus 30% of the excess
over $57,325.
Over $87,350 but
not over $155,975 . . . $21,338.25, plus 35% of the excess
over $87,350.
Over $155,975 . .
. . . . . . . . . . . .$45,357.00, plus 38.6% of the excess
over $155,975.
Estates and
Trusts [§1(e)]:
If taxable income
is: The
tax is:
Not over $1,900 .
. . . . . . . . . . . .15% of taxable income.
Over $1,900 but
not over $4,500 . . . . .$285.00, plus 27% of the excess
over $1,900.
Over $4,500 but
not over $6,850 . . . . .$987.00, plus 30% of the excess
over $4,500.
Over $6,850 but
not over $9,350 . . . . .$1,692.00, plus 35% of the excess
over $6,850.
Over $9,350 . . .
. . . . . . . . . . . .$2,567.00, plus 38.6% of the excess
over $9,350.