Federal
Tax Cuts Enacted
Written By:
Attorney Jeffrey A. Marshall, CELA*
With
the help of a tie breaking vote by Vice President Cheney, Congress has
passed the Jobs and Growth Tax
Relief Reconciliation Act of 2003.
Only time will tell if this most recent tinkering with the tax laws
will result in "jobs and growth" for Americans. However, much of the
tax "relief" will be immediate, and in some cases, retroactive.
Some of the provisions of the new law include:
Reductions in Income Tax
Rates Income tax
brackets are immediately reduced as follows:
o
38.6% lowered to 35%
o
35% lowered to 33%
o
30% lowered to 28%
o
27% lowered to 25%
o
The 10-percent bracket is expanded from $12,000 of taxable
income to $14,000 ($6,000 to $7,000 for single individuals).
Reduction in the Rate of Tax
on Capital Gains The tax rate on capital gains has been reduced so
that higher income individuals will pay 15% on long term gains rather than
20%. Taxpayers in the 10% and
15% brackets will pay only 5%. The
new rates apply to assets sold or exchanged and installment payments
received after
May 5, 2003
.
Reduction in the Rate of Tax
on Dividends Most
dividends are to be taxed as net capital gains at the new, lower capital
gains rates. This effectively
reduces the highest rate of tax on most dividends from 38.6% to 15%.
The tax rates on dividends and capital gains are now down to levels
that were last seen during the Great Depression.
The lowering of these dividend and capital gains rates does not,
however, apply to IRAs, 401Ks and other retirement accounts.
Withdrawals from retirement accounts will continue to be taxed at
higher ordinary income levels, even to the extent they represent dividends
and capital gains.
Business Investment Stimulus
The bill increases the amount of investments that can be immediately
deducted by small businesses under Code Section 179 from $25,000 to
$100,000 and provides some other increased deductions for businesses.
Marriage Penalty Relief and
Expansion of the Child Tax Credit The law reduces, to some extent,
the marriage penalty which causes a married couple's tax liability to be
greater than their combined liabilities would be as single filers.
The tax credit for children increases to $1,000 per child.
To give a quick stimulus to the economy, the increased child credit
of up to $400 per child will be paid out to families in advance, beginning
in July.
$20 Billion in Assistance to
the States The tax act provides $20 billion dollars in desperately
needed tax assistance to the States.
$10 Billion of this relief is targeted to Medicaid. The States will
get a temporary 2.95 percentage point increase in rate of federal Medicaid
matching funds (FMAP). In
addition, states will receive $10 billion to be used to provide essential
government services and to cover the state's cost of complying with
unfunded federal mandates.
The tax act, which was finally approved by Congress, will probably
provide more immediate stimulation of the economy than the measures
initially proposed by the President. In particular, the $20 billion in
state assistance should have a strong effect.
In order to keep down the budgeted cost of the tax
act, many of its provisions are temporary and utilize the bizarre "phase
in - phase out" structure that has been familiar of late. (What
happened to promised tax simplification?) It is anticipated that the
ultimate cost of the tax act will be much greater than the budgeted $350
billion figure since most observers assume that the temporary cuts will
become permanent
Attorneys
Parker and Kron Teach Lawyers About Nursing Home Issues
Attorneys
Matthew Parker and Kathy Kron of Marshall & Associates have been named
to the faculty for an upcoming series of courses entitled Representing
an Individual Entering a Nursing Home.
The Pennsylvania Bar Institute's day-long program for lawyers
will take place between May 30th and June 27th at
six different locations throughout the state.
Matthew Parker will be teaching a session in
Pittsburgh
entitled "Medicaid" on May 30th, while Kathy Kron will be
teaching sessions on "Understanding Veterans Benefits" in
Philadelphia
, Mechanicsburg, and
Scranton
.
Although these educational programs are primarily
intended for lawyers, they are open to the public.
For more information, contact the Pennsylvania Bar Institute at
800-247-4724 or online at http://www.pbi.org/Courses/SpecificCourses/nhome.
Does
Your Club Or Organization Need A Speaker?
If
you are interested in having an attorney or geriatric planning specialist
from
The
Elder Law Firm of Marshall & Associates speak to your group, or at an
upcoming event, please contact
our
Public Education Coordinator, Melissa
Bottorf
at
mbottorf@paelderlaw.com
or 1-800-401-4552
Looking
for Higher Interest Rates? Consider Savings
Bonds!
Written By:
Attorney Jeffrey A. Marshall, CELA*
U.S.
savings bonds have been around since 1935.
But, this old time investment has new allure in today's low
interest rate environment. Savings
bonds offer an attractive investment alternative for cautious savers who
are disappointed with the returns being offered on Certificates of Deposit
and who don't like the heavy surrender charges attached to the
higher-rate fixed annuities being sold by many banks.
Most of the over 50 million Americans who own savings
bonds hold Series EE bonds. Series
EE bonds come in eight different denominations, from $50 to $10,000. These
bonds are issued at ½ face value. Interest
is based on prevailing market rates and the variable rate changes every
six months. Series EE bonds purchased in May 2003 earn initial interest of
2.66%. This rate looks pretty good compared with bank certificates of
deposit and other fixed rate investments currently available to
conservative savers.
Government I bonds are another, perhaps even more
attractive, alternative. The
"I" stands for "Inflation-index." I bonds purchased in May are
earning an initial mouth- watering interest rate of 4.66%.
Part of this rate is permanently fixed, and part will vary with
inflation over the life of the investment. This means they offer the saver
some protection if interest rates go up.
I bonds are sold in denominations from $50 to $10,000 and can earn
inflation adjusted interest for up to 30 years.
Purchases are limited to $30,000 per year.
Newly issued Series EE and I bonds can be cashed any
time after 12 months. Bonds with issue dates before February 2003 can be
cashed anytime after 6 months. In addition to being unable to cash the
bonds for a year, the investor will lose three months' worth of interest
if the bond is redeemed before five years. For example, if you redeemed a
bond after 24 months, you would receive only 21 months of earnings.
For these reasons, investors should view savings bonds as a
long-term investment.
An additional attraction of savings bonds is the
exemption of their interest from state and local income tax.
Federal income tax can be deferred for up to thirty years until the
bond is cashed in. I bonds (and some EE bonds) may also be eligible for
tax benefits upon redemption when used to pay for qualified education
expenses.
Savings bonds have a lot to offer seniors and other
conservative investors. Investors can buy savings bonds at their local
bank, but they may need to ask about this ultra-safe alternative
investment, since banks don't earn much from the sale of government
bonds.
Investors can also purchase savings bonds directly
from the government over the internet.
Setting up an account is easy, and purchases can be deducted from
an existing bank account. For more information, and to set up an account,
visit the government's Treasury direct site at www.treasurydirect.gov.
Misconception
#8:
If
you are married, they take half your assets when you go in a nursing home
Here
is the next installment in our discussion of some of the most prevalent
misconceptions about Medicaid and the rules for payment of nursing home
costs. If you would like to read past Medicaid Misconceptions, go to our
website at: www.paelderlaw.com
and choose "Newsletters" on the left hand side of the screen.
Misconception # 8:
If you are married,
they take half your assets when you go in a nursing home.
The Truth: The bad news is that the
rules are much more complicated than that! The good news is that, almost
always, with proper planning, much more than half of the assets of a
married couple can be protected. Often
ALL of the assets can be protected, if you know what you are doing.
Both Federal and State laws give a lot of legal
rights to the spouse who is not in a nursing home.
These laws and regulations are intended to avoid the impoverishment
of the at-home spouse. They
can be used to protect both the assets and the income of the couple from
being lost to the cost of nursing home care. The rules are complicated,
but this is one time that complications are good - because they mean that
married couples don't have to lose half of what they own to nursing home
costs.
Did
you know. past issues of the Elder Care Law Alert are available on our
website at:
www.paelderlaw.com/news.html
"Understanding the Rules: Medicaid
Payment for Long Term Care"
A
Free Seminar Presented by
Marshall
& Associates
Seminar
Dates & Locations
Thursday,
June 5th, 2003
at
6:30
PM
The
Woodlands,
Wilkes-Barre
Saturday,
June 14th at
10:00
AM
The
Radisson at
Lackawanna
Station,
Scranton
Reservations
are suggested, but not required. SIGN
UP ONLINE
or call 1-800-401-4552 for more information or to reserve your spot for
one of these seminars!
Do
you have a friend or colleague who would enjoy reading the
Elder Care Law Alert? If
so, please feel free to forward it to them. Simply use the "Forward"
button on your e-mail program.
To
subscribe or unsubscribe to the Elder Care Law Alert,
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*Attorney
Marshall
is certified as an
Elder Law Attorney by the National Elder Law Foundation under
authorization from the Pennsylvania Supreme Court
© 2000-2005
Marshall & Associates www.paelderlaw.com
