Publication 553 - Highlights Of 2002 Tax Changes Page 10
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31For more information, see Publication 3605, Fast Track
Self-Employment Tax
Mediation, or visit
The self-employment tax rate on net earnings remains the
same for 2003. This rate, 15.3%, is a total of 12.4% for
social security (old-age, survivors, and disability insur-
2003 Changes
ance) and 2.9% for Medicare (hospital insurance).
The maximum amount subject to the social security part
for tax years beginning in 2003 has increased to $87,000.
Standard Mileage Rate
All net earnings of at least $400 are subject to the Medicare
part.
Business-related mileage. For 2003, the standard mile-
age rate for the cost of operating your car, van, pickup, or
Depreciation and Section 179
panel truck is decreased to 36 cents a mile for all business
Deduction
miles.
Car expenses and use of the standard mileage rate are
explained in chapter 4 of Publication 463, Travel, Enter-
Increased section 179 deduction. The total cost of sec-
tainment, Gift, and Car Expenses.
tion 179 property that you can elect to deduct is increased
from $24,000 to $25,000 beginning in 2003. For more
information on the section 179 deduction, see chapter 2 in
Medical and move-related mileage. For 2003, the stan-
Publication 946, How To Depreciate Property.
dard mileage rate for the cost of operating your car for
medical reasons or as part of a deductible move is de-
Coverdell Education Savings Account
creased to 12 cents a mile. See Transportation under What
(ESA)
Medical Expenses Are Deductible in Publication 502, Med-
ical and Dental Expenses, or Travel by car under Deducti-
ble Moving Expenses in Publication 521, Moving
There will be no additional tax on excess contributions if
the excess (and earnings on that amount) is withdrawn
Expenses.
before the beginning of the sixth month following the year
of the contribution. Generally, a calendar year taxpayer will
Social Security and Medicare Taxes
have until May 31, 2003, to withdraw an excess contribu-
tion for 2002. Previously, excess contributions (and earn-
For 2003, the employer and employee will continue to pay:
ings) had to be withdrawn by the due date (including
extensions) for filing the beneficiary’s tax return or, if no
1) 6.2% each for social security tax (old-age, survivors,
return was required, by April 15 of the following year. The
and disability insurance), and
Coverdell ESA is explained in chapter 5 of Publication 970,
2) 1.45% each for Medicare tax (hospital insurance).
Tax Benefits for Education.
Lifetime Learning Credit
Wage limits.
For social security tax, the maximum
amount of 2003 wages subject to the tax has increased to
Beginning in 2003, the amount of qualified tuition and
$87,000. For Medicare tax, all covered 2003 wages are
related expenses you may take into account in figuring the
subject to the tax. For information about these taxes, see
lifetime learning credit increases from $5,000 to $10,000.
Publication 15, Circular E, Employer’s Tax Guide.
The credit will equal 20% of these qualified expenses, with
the maximum credit being $2,000. The lifetime learning
Household employees. The $1,300 social security and
credit is explained in chapter 2 of Publication 970, Tax
Medicare wage threshold for household employees has
Benefits for Education.
been increased to $1,400 for 2003. This means that if you
pay a household employee cash wages of less than
Child and Dependent Care Credit
$1,400 in 2003, you do not have to report and pay social
Increase
security and Medicare taxes on that employee’s 2003
wages. For more information on household employment
Beginning in 2003, the following changes will be made to
taxes, see Publication 926, Household Employer’s Tax
the child and dependent care credit. For details on this
Guide.
credit, see Publication 503, Child and Dependent Care
Credit.
Self-Employed Health Insurance
Deduction
Credit percentage. The credit will be as much as 35% of
your qualified expenses. The 35% rate will be reduced if
For 2003, this deduction increases to 100% of the amount
your adjusted gross income is more than $15,000. For
paid for medical and qualified long-term care insurance for
2002, the credit could be no more than 30% of qualified
you and your family. For more information, see chapter 7 in
expenses, and the 30% rate was reduced if adjusted gross
Publication 535, Business Expenses.
income was more than $10,000.
Page 10
Chapter 1 Tax Changes for Individuals
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