Tax Matters from 2002

• Educator Expenses:

  • If you were an educator, you may be able to deduct up to $250 of expenses you paid even if you do not itemize your deductions.

• Tuition and Fees Deduction:

  • You may be able to deduct up to $3,000 of the qualified tuition and fees you paid in 2002 for yourself, your spouse, or your dependents. However, you cannot take this deduction if you can be claimed as a dependent on someone ’s tax return or if you claim an education credit on line 48 for the same student.

• Retirement Savings Contributions Credit:

  • You may be able to take a credit of up to $1,000 for qualified retirement savings contributions. However, you cannot take this credit if your adjusted gross income (AGI) on line 36 is more than $25,000 ($37,500 if head of household, $50,000 if married filing jointly).

• Health Insurance Credit for Eligible Recipients:

  • You may be able to take this credit only if you were an eligible trade adjustment assistance (TAA), alternative TAA, or Pension Benefit Guaranty Corporation pension recipient. By February 18, 2003,Form 8887 showing that you were an eligible recipient should be sent to you. Use Form 8885 to figure the amount, if any, of your health insurance credit.

• Qualifying Child: (New Definition)

  • New rules apply to determine who is a qualifying child for purposes of the child tax credit and the earned income credit.   See the instructions

Modifications of existing tax laws and rules

Further reduction in Tax Rates:  Most of the tax rates have decreased by 1 /2 %and a new 10%tax rate applies to all filers.

Schedule B: Fewer People Have To File! You may not have to file Schedule B if your taxable interest is $1,500 or less and your ordinary dividends are $1,500 or less.

Student Loan Interest Deduction: The 60-month limit on interest payments no longer applies and the modified AGI limit has increased.

IRA Deduction Expanded: You, and your spouse if filing jointly, may be able to deduct up to $3,000 ($3,500 if age 50 or older at the end of 2002). If you were covered by a retirement plan, you may be able to take an IRA deduction if your modified AGI is less than $44,000 ($64,000 if married filing jointly or qualifying widow(er)).

Adoption Credit: You may be able to take a credit of up to $10,000 per child for qualified adoption expenses you paid. See Form 8839 for details.

Self-Employed Health Insurance Deduction: You may be able to deduct up to 70% of your health insurance expenses.

Standard Mileage Rates: The 2002 rate for business use of your vehicle is 36 1 /2 cents a mile. The 2002 rate for use of your vehicle to get medical care is 13 cents a mile.

Coverdell Education Savings Account (ESA) Distributions: If you received a distribution from a Coverdell ESA in 2002, you now report only the taxable amount of the distribution on line 21. Also, a distribution may not be taxable if it was used to pay qualified elementary and secondary school expenses. See IRS Pub. 970 for more details.

Qualified State Tuition Program Earnings: If you received a distribution, you may now be able to exclude part or all of the earnings from income.

Foreign Earned Income Exclusion: You may be able to exclude up to $80,000 of foreign earned income.

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Last modified: February 19, 2007