LEGAL
ISSUES
By Edward F. Morrison,Jr.
Go
to the
Balter Tax Service
Website
 A LOOK
AT THE TAX RELIEF ACT OF 2001 I have been a “taxman” for 40 years, and frankly it is time to think of retiring or at least slowing down. The government has made the tax preparation business a “growth industry” as long as I have been involved in it, and the new law offers new challenges to both taxpayers and tax preparers. This is the largest tax cut in over 20 years. I guess if the business is there, I shall continue as long as I can operate a computer. This law is equivalent to a tax preparer’s pension program. Here are some of the main provisions:
The law expands the current 5 brackets to 6 brackets. It creates a new 10% rate bracket. By the year 2006, the 28% bracket will be 25%; the 31% bracket will be 28%; the 36% bracket will be 33%; and the 39.6% bracket will be dropped to 35%. If you are someone’s dependent— you do not get 10% bracket treatment—your bottom rate will be 15%. A sneaky provision of the current tax law has been the gradual phase out of your personal exemptions and limitations on itemized deductions. In other words, if you made too much money, you not only were in a high tax bracket, but you could also lose your personal exemptions and up to 80% of your itemized deductions. (That always rubbed me the wrong way.) Beginning in 2006, both the phase out of personal exemptions and limitations of itemized deductions will slowly be reduced until they are eliminated in 2010. Marriage penalty relief will not begin until 2005, increasing the standard deduction for married filers to twice that of single filers gradually until 2009. If you file jointly and you itemize, you get no benefit. In order to get the “marriage bonus” you must file a joint return with a standard deduction. The current Estate tax will gradually be reduced until the expiration of the entire tax in 2010. At this time, however, the repeal will only affect those who die in 2010, as the provision will expire in 2011. It would be quite a coup if you can plan your own demise during that year. This gives new meaning to tax planning. (Be careful of your progeny trying to bump you off during that year. I know where you can get a good deal on a bulletproof vest.) IRA contributions will increase. For both traditional and Roth IRAs the limits are:
There are even “catch-up” provisions to the IRAs. Taxpayers will be allowed an added $500 in 2002-2005 and $1,000 in 2006 in the event they had not made full contributions in prior years so that they could contribute what they should have been able to put in but failed to do it earlier. College tuition will be given its place in the tax code— but only from 2002-2005. If you have AGI of up to $130,000 you can take either a credit (Hope or Lifetime) or a deduction on the return. Grandparents or parents may have been contributing $500 to an education IRA for children. The new law increases this contribution to $2,000. There is a lot more, but you get some idea of the new rules. One thing is certain—the tax laws will change many more times during the next 10 years. Obviously it depends who is President and what party controls the Congress. As far as I am concerned, I’m ready to work until I drop. I cannot believe this “Retirement Package” that has been sent to Tax Preparers. Now I can keep on traveling. After all, I have never had my photo taken at the TAJ MAHAL.
The State of California Department of Housing has asked the City of Santa Monica to analyze the impact of its regulations, particularly on market rate housing according to the LookOut (www.surfsantamonica.com). The state has asked the City to analyze a list of “potential constraints” that could “act to delay or limit housing and add additional costs to housing.” Items that need to be analyzed are: ordinances that reduce building size, limit simultaneous constructions, lower the age of landmark buildings and reduce the sizes of buildings that require Planning Commission approval. “The City may need to add programs to remove or mitigate any identified constraints,” according to the State’s document. Barry Rosenbaum, the senior land use attorney for SM says, “It was the economy and not the City’s policies that was preventing housing to be feasible.” (These guys can lie with a straight face—for 22 years it has been a burden to build housing in SM—it must be the economy) All I can say is: It is about time somebody made an issue over this matter. How many times have you read in this column about the burden of building new construction in our town? How many times have I written about my own personal experiences regarding building in Santa Monica? The State wants everyone to have a level playing field. They know all about “Community Corp.” (Remember how they can build 47 units where you and I would be limited to 26? Com-munity Corp gets “bonuses” while market rate builders get the “shaft”. The State wants to level the playing field. Market rate housing should get treated the same as any other housing. What an unusual concept! To say that the City’s obstructionist policies have added $50,000-$100,000 to my construction costs would be accurate. By the way, we have still not begun construction on our simple project. In August 2000, we officially started this project. In August 2001 we still wait for approval by the City. Maybe in August 2002 we may make some headway! Of course the City is not trying to discourage anyone— it’s the economy, stupid!
Now
we can get down to business. I know you were SB
985 (Kuehl): 90 Day Notice SB
1098 (Alarcon): Housing SB
910 (Dunn): Housing SB
732 (Ortiz): Toxic Mold SB
17XX (Brulte): Tax Credits Solar Energy If
you want to read the exact text of any of these bills, go to
“Members Only” section of this site. Once there, you
can “Link” to the State of California and be able
to get copies, an Thanks
for reading.
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