January 26, 2000 Happy New Year! The following tax rates and amounts are effective for 2000: 1) OASDI rate remains at 6.2% but wage base rises to $76,200 from $72,600 2) Medicare rate remains at 1.45% and there is no wage limit. 3) The maximum retirement earnings one can earn before social security benefits will start to be withheld is $17,000, up from $15,500 for those ages 65 through 69, and $10,800, up from $9,600 for those under age 65. There is no limit on earnings for 70 and older. The retirement age for social security begins to rise this year. Until now, the normal retirement age to receive full benefits was 65. Those turning 62 this year are affected. They will get reduced benefits if they start receiving payments before they attain age 65 and two months. Those who turn 62 in 2001 must wait until they are 65 and four months . Ultimately, anyone born after 1959 won’t get full benefits before age 67. 4) Personal exemptions rise to $2,800 from $2,750 and exemptions will begin to phase out at $189,950 of AGI for couples. For singles, $126,600. 5) Standard deductions will increase to $7,350 for marrieds in ‘00, up from $7,200. For children age 14 who must file returns, it remains at $700. Can be as high as $4,300 if they have earned income. 6) Income tax rates for ‘00 are the same as 1998, 15%, 28%, 31%, 36%, 39.6% but brackets have been adjusted for inflation. 7) Federal unemployment Tax Rate (FUTA) remains at . 8) IRS interest rate on refunds remains at 8% and 9% on taxes owed . 9) Alternative Minimum Tax rate remains at 26% on first $175,000 of income and 28% over that. More people will pay this since brackets and exemptions are not indexed and there are fewer deductions allowed. 10) Back up withholding rate remains at 31% 11) 401(k) pay-in limitation rises to $10,500, up from $10,000. 12) 403(b) contribution limit rises to $10,500, up from $10,000. 13) Maximum level of pay on which pay-ins to plans can be based upon rises to $170,000 up from $160,000, with the maximum pay-in for profit sharing plans rising to $25,500 from $24,000, for plans putting in the maximum 15%. No change to maximum money purchase plan pay-in of $30,000. 14) Business meal and entertainment deductibility remains at 50%. Standard business mileage allowance rises to 32.5¢ per mile, up from 31¢. 15) Self-employeds and owners of corporations can deduct 60% of medical insurance premiums as an adjustment to arrive at adjusted gross income, the same as in 1999 16) Federal estate tax exemption rises to $675,000 from $650,000. 17) New York State Disability Insurance employee percentage is .5% of wages but not more than 60¢ per week 18) Threshold for deposit requirements increases from $500 to $1,000. 19) Maximum amount of rapid depreciation for small businesses rises to $20,000, up from $19,000 in ‘99. 20) Simplified per diem allowances are up slightly for ‘00. 21) Parents get larger tax credits for children under 17, $500 per child up from $500 in 1999. Phaseout for marrieds with AGI exceeding $110,000 and single over $75,000. 22) Phaseout for IRA deductions start at $52,000 up from $51,000 and end at $62,000 for couples, up from $61,000 an increase of $1,000. Phaseout for singles is $52,000 to $42,000. 23) More interest on some education loans is deductible in ‘00, up to $2,000 from $1,500. Next year to $2,500. 24) Eligible portion of long term care premium rises for 2000, up to $2,750 for those age 70 and older, $2,200 between ages 60 and 70, $820 between ages 50 and 60, $410 from 40 to 50 and $220 for age 40 and under, deductible as medical expenses. It is the age at the end of 2000 that counts. Daily limits for payments is $190. 25) Medicare Part B premium remains at $45.50, still less than 1995! 26) Luxury car tax drops to 5% for autos costing over $38,000. 27) The maximum amount of compensation an employee may elect to defer under a SIMPLE plan remains at $6,000. 28) The nanny tax threshold rises to $1,200 for ‘00 a $100 increase. No social security tax is due for domestics paid $1,200 or less this year. It is not indexed for inflation. FUTA is due whenever a domestic employee is paid $1,000 or more in a calendar quarter in the current or prior year. 29) Five year averaging is unavailable on lump sum distributions from pension plans in ‘00. Recipients who were born before 1936 can still use ten year averaging. Again, We Exceed our Expectations In my capacity as a money manager, the average of my model portfolios were expected to achieve a 21% return per year on a five year average. For 1999, they achieved in excess of 31% (six percentage points greater than the Dow Jones average and 12 points better than the S & P index). We note here that past performance does not guarantee future performance. For more details, please contact Howard Lisch and Lisch Investment Services, our money management division. Predictions There will not be any action to fix social security in 2000. Congressional Democrats detect a chance to regain control in ‘00, especially the House. A social security fix would rob them of the key campaign issue that the GOP threatens social security. In order for there to be a social security repair job, Republicans and Democrats must find a way to work together first. This will be more difficult in the wake of the impeachment. Before taxes can be cut, social security must be repaired. More Predictions As predicted, the Dow Jones Industrial Average reached 10,000 by the millennium. I predict it will continue to surge thereafter. As always, if you have any questions about these or any other matters, do not hesitate to call me.