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Line 9b. Qualified Dividends - Qualified dividends paid to non-corporate shareholders will now be taxed at the favorable rates that apply to net capital gain (i.e., 15% or 5%).

Line 13. Capital Gain or Loss - Long-term capital gains realized on or after May 6, 2003 will be taxed no higher than 5% or 15% (generally at 10% or 20%, for capital gains taken into account before May 6, 2003).

Line 24. IRA Deduction - The adjusted gross income phaseout ranges for making deductible contributions to regular IRAs by taxpayers that are active participants in an employer-sponsored retirement plan are higher for 2003. The phaseout range is $60,000 to $70,000 for joint return filers, $40,000 to $50,000 for single taxpayers. The 2001 Tax Act increased the maximum annual contribution limit from $2,000 to $3,000 for 2002 and beyond. Individuals who are at least 50 by the end of the tax year can also make additional "catch-up" contributions of up to $500. Caution: A taxpayer's IRA contribution limit as described in the preceding paragraph applies to the combined contribution to all of the taxpayer's traditional and Roth IRAs. Thus, a taxpayer who contributes $3,000 to a Roth IRA cannot also contribute to a traditional IRA, and vice versa unless he or she is eligible to make "catch up" contributions. Allowable contributions can be split between the two.

Line 29. Self-Employed Health Insurance Deduction - A qualifying self-employed (or a partner or a more-than-2%-shareholder of an S corporation) may deduct 100% of amounts paid for medical insurance.

Line 37. Itemized Deduction Or Standard Deduction - For 2003, the standard deduction is $4,750 for single filers, $4,750 for married persons filing separately, $9,500 for joint filers and qualifying widow(er)s, and $7,000 for heads of household. Itemized deductions (other than deductions for medical expenses, investment interest, non-business casualty and theft losses and gambling losses) are reduced if adjusted gross income in 2003 is more than $139,500 ($69,750 for marrieds filing separately).

Line 39. Personal Exemptions - The exemption for 2003 is $3,050. The exemption starts to phase out if adjusted gross income exceeds: $139,500 for single filers, $104,625 for married persons filing separately, $209,250 for joint filers and qualifying widow(er)s, and $174,400 for heads of household.

Line 41. 1. For single individuals and married taxpayers filing separately, the 10% bracket applies to the first $7,000 of taxable income (to the first $14,000 of taxable income for married joint filers and qualifying surviving spouses).

2. The 15% tax bracket for joint returns is widened. 3. The regular income tax rates above 15% are reduced to 25%, 28%, 33%, and 35%.

Line 42. Alternative Minimum Tax (Form 6251) - The maximum AMT exemption for individuals is increased to $58,000 for married taxpayers filing jointly, to $29,000 for married individuals filing separately, and to $40,250 for unmarried individuals.

Line 45. Credit For Child And Dependent Care Expenses - The maximum credit is 35% of employment-related expenses, and the maximum amount of employment-related expenses that may be used to compute the credit is $3,000 for one qualifying individual and $6,000 for two or more qualifying individuals.

Line 47. Education Credits - For 2003, the availability of the Hope and Lifetime Learning credit phases out ratably for taxpayers with a modified adjusted gross income of $41,000 to $51,000 ($83,000 to $103,000 for joint return filers). For 2003, the maximum Lifetime Learning credit was increased from $1,000 to $2,000.

Line 49. Child Tax Credit - The maximum child tax credit is increased from $600 to $1,000 per eligible child (the increase in the child tax credit amount was paid in advance during 2003 to many taxpayers).

Line 50. Adoption Credit - The maximum adoption credit is $10,160 for 2003 and phases out when modified adjusted gross income exceeds $152,390.

Line 55. Self-employment Tax - The maximum amount of self-employment income subject to the FICA tax is $87,000. There is no ceiling on the Medicare tax wage base.

Line 63. Earned Income Credit - The maximum credit is higher and phaseout figures have been revised.

Line 64. Excess Social Security And RRTA Tax Withheld - The maximum Social Security (OASDI) tax for 2003 was increased to $5,394 (computed on the first $87,000 of wages) for purposes of computing the credit for excess tax withheld.

Schedule A itemized deductions: Line 1. Medical And Dental Expenses - These expenses now include eye surgery to correct defective vision and procedures to facilitate pregnancy.

Line 20. Unreimbursed Employee Business Expenses -For 2003, the standard mileage rate for business travel was lowered to 36 cents a mile.

Line 28. Total Itemized Deductions - Adjusted gross income over $139,500 ($69,750 for marrieds filing separately) triggers a phased-in reduction in itemized deductions.

Schedule B interest and dividends:

Line 3. Excludable Interest On Series EE Or Series I U.S. Savings Bonds - The exclusion for education-related savings bond interest phases out at higher income levels. For 2003, the phaseout begins at modified adjusted gross income above $58,500 ($87,750 on a joint return).

KEY CHANGES IN WISCONSIN TAXES

Classroom expenses Educators may now deduct up to $250 in expenses to arrive at Wisconsin taxable income. For tax years beginning in 2002 or 2003, an "eligible educator" is allowed a pre-adjusted gross income deduction on the Federal Form 1040 of up to $250 for classroom expenses. (The deduction was reported on line 23 of the Form 1040 for 2002 and should be in the same area of the Form 1040 for 2003.) Eligible expenses include books, supplies, and computer equipment.

On the 2002 Wisconsin Form 1 return, this deduction was not available and was "added back" to federal adjusted gross income to arrive at Wisconsin taxable income. On the 2003 Wisconsin Form 1, these classroom expenses will now be deductible. (The Wisconsin Form 1 instructions were not available as of this writing, and we suggest that you read the Form 1 instructions carefully to see if Wisconsin has modified the deduction in any way.)

Marital property Wisconsin has recently issued new and very lengthy guidance related to the impact of marital property laws on the reporting of income by spouses and ex-spouses living in Wisconsin. Great care should be taken and professional advice should be sought for returns for the year in which a divorce occurs or whenever married couples decide to file separately.

Gift Taxes The annual gift tax exclusion is $11,000 per recipient for 2003 and 2004.

PAC dues not deductible As you work on your 2002 taxes, remember that contributions to the WEAC Political Action Committee or any other PAC are not tax deductible.