You should consider the items in this section when you figure your
estimated tax or how much income tax you want withheld from your pay
for 2001. For more information on these and other tax changes, see
Publication 553,
Highlights of 2000 Tax Changes.
Student loan interest deduction.
For 2001, the amount of interest you may be able to deduct on a
loan for qualified higher education expenses for yourself, your
spouse, or your dependents has increased to $2,500.
Foreign earned income exclusion.
The amount of foreign earned income that you may be able to exclude
increases to $78,000 for 2001.
Exemption amount increased.
For 2001, the amount you can deduct for each exemption increases to
$2,900.
Phaseout of exemptions.
Your deduction for exemptions is reduced by 2% for each $2,500
($1,250 if you are married filing separately), or part of that amount,
by which your adjusted gross income is more than an amount based on
your filing status. The amounts for 2001 are:
| Single |
$132,950 |
| Married filing jointly
or qualifying widow(er) |
$199,450 |
| Married filing separately |
$99,725 |
| Head of household |
$166,200 |
Standard deduction.
Individuals who do not itemize deductions have an increased
standard deduction for 2001. See the 2001 Standard Deduction
Tables at the end of chapter 2.
Reduction of itemized deductions.
For 2001, certain itemized deductions are reduced by 3% of the
amount of your adjusted gross income that is more than $132,950
($66,475 if you are married filing separately). For information on the
reduction, see Reduction of itemized deductions in chapter 2.
Self-employment tax.
For 2001, the social security (old-age, survivor, and disability
insurance) part of the self-employment tax is 12.4% of up to $80,400
of net earnings. The Medicare (hospital insurance) part of the tax is
2.9% of all net earnings.
Maximum section 179 deduction.
For 2001, the maximum section 179 deduction increases to $24,000.
Estimated tax safe harbor for higher income individuals.
For installment payments for tax years beginning in 2001, the
estimated tax safe harbor for higher income individuals (other than
farmers and fishermen) has been modified. If your adjusted gross
income is more than $150,000 ($75,000 if married filing a separate
return), you will have to deposit the smaller of 90% of your expected
tax for 2001 or 110% of the tax shown on your 2000 return
to avoid an estimated tax penalty.
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