Tax inflation-adjustments announced for 2004
IRS Rev. Proc. 2003-85 describes the inflation-adjusted tax figures for 2004. The following education-related tax provisions are affected:
- The standard deduction is increased from $750 in 2003 to $800 in 2004. This means that a dependent child can receive up to $800 in investment income without incurring federal tax. The "kiddie tax" for a dependent child under the age of 14 kicks in at $1,600 in 2004, up from $1,500 in 2003.
- The income phase-out range for the Hope Scholarship credit and Lifetime Learning credit is increased to $85,000-$105,000 in 2004 for married couples filing jointly (up from $82,000-$102,000 in 2003), and $42,000-$52,000 for others (up from $41,000-$51,000 in 2003).
- The income phase-out for the tax-free redemption of qualifying Series EE and I bonds in 2004 begins at $89,750 for joint returns and $59,850 for other returns. The exclusion completely phases out at $119,750 for joint returns and $74,850 for other returns.
- The income phase-out for the maximum $2,500 deduction of interest on education loans remains at $50,000 - $65,000 ($100,000 - $130,000 for joint returns).
- The annual gift exclusion remains at $11,000.
For more information, click hereReturn to 529 News center- The standard deduction is increased from $750 in 2003 to $800 in 2004. This means that a dependent child can receive up to $800 in investment income without incurring federal tax. The "kiddie tax" for a dependent child under the age of 14 kicks in at $1,600 in 2004, up from $1,500 in 2003.
- The income phase-out range for the Hope Scholarship credit and Lifetime Learning credit is increased to $85,000-$105,000 in 2004 for married couples filing jointly (up from $82,000-$102,000 in 2003), and $42,000-$52,000 for others (up from $41,000-$51,000 in 2003).
- The income phase-out for the tax-free redemption of qualifying Series EE and I bonds in 2004 begins at $89,750 for joint returns and $59,850 for other returns. The exclusion completely phases out at $119,750 for joint returns and $74,850 for other returns.
- The income phase-out for the maximum $2,500 deduction of interest on education loans remains at $50,000 - $65,000 ($100,000 - $130,000 for joint returns).
- The annual gift exclusion remains at $11,000.