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The 'JCWA 2002' May Help Lower Your Taxes!!

The major 2002 tax bill was the Job Creation and Worker Assistance Act of 2002, but several tax provisions from prior bills became effective in 2002. To add to the confusion, there are proposed tax law changes that may create even more changes this year. Here are a few highlights.

INDIVIDUAL RETIREMENT ACCOUNTS. The general IRA contribution limit is $3,000 for 2002. For workers aged 50 and older, the contribution limit is $3,500. The IRA contribution limits are set to gradually increase over seven years as a result of the Tax Relief Act of 2001. The income eligibility limits for deductible IRAs is raised a bit for taxpayers who are covered by an employer retirement plan. At least a partial IRA deduction will be available to joint filers with adjusted gross incomes (AGI) of less than $64,000 in 2002 and to singles with incomes under $44,000.

EDUCATION SAVINGS ACCOUNTS. Starting in 2002, Coverdell education savings accounts are significantly more tax-advantaged. Withdrawals are excluded from gross income if used for education-related costs incurred in connection with primary, secondary, or post-secondary schooling. The annual contribution limit has been increased from $500 to $2,000 with AGI phase-out caps being raised as well. Unlike past years, the contribution deadline for 2002 is April 15, 2003.

COLLEGE TAX DEDUCTION. For 2002 through 2005, a $3,000 above-the-line deduction can be claimed for college tuition in lieu of the Hope or Lifetime tuition credits. The deduction can be claimed regardless of whether you itemize your deductions. It will begin to phase out for joint filers with an AGI over $130,000, and for single filers with an AGI over $65,000.

STUDENT LOAN DEDUCTION. The student loan interest deduction becomes available to more individuals and for an unlimited number of years starting in 2002. Income-eligibility limits increase from $50,000 to $65,000 for single filers and $100,000 to $130,000 on joint returns. The deduction is no longer limited to the first five years that interest payments are due on the loan.

EMPLOYER-PROVIDED TUITION ASSISTANCE. The tax exemption for employer-provided educational assistance is extended to graduate-level studies. In the past, only undergraduate courses qualified for the $5,250 per year exemption.

HOPE & LIFETIME TUITION CREDITS. The income-eligibility limits for the Hope Scholarship and Lifetime Learning college tuition credits go up a bit. The credits will start to phase out for married couples with modified adjusted gross incomes of $82,000 in 2002. For singles, the benefit of the credits starts to phase out for incomes above $41,000.

DEDUCTION FOR TEACHERS. Elementary and secondary school teachers will receive an above-the-line deduction for qualifying education expenses (classroom supplies, books, and equipment) equal to $250 for 2002 and 2003. The deduction is available to “eligible educators” who are described as teachers of kindergarten through grade 12, instructors, counselors, principals, and aides, who work at least 900 hours during a school year.

CAR MILEAGE. The 2002 business mileage rate was 36.5 cents; medical and moving rates, 13 cents; charitable rate, 14 cents. For 2003, the business rate falls to 36 cents per mile; medical and moving rates, 12 cents; charitable rate will remain the same.

SELF-EMPLOYED HEALTH COVERAGE. In 2002, self-employed workers can deduct 70% of their health insurance premiums without having to itemize. The deductible portion rises to 100% in 2003. The special deduction can be claimed for any month you weren’t eligible to participate in a subsidized health plan of another employer, including your spouse’s employer.

DEPRECIATION BONUS. Businesses are eligible to claim an additional first-year depreciation deduction equal to 30 percent of the cost of the equipment. This “bonus depreciation” applies to most types of business property—except for real estate—purchased between 9/11/01 and 9/10/04.

NET OPERATING LOSSES. To help businesses that have suffered during the economic slowdown, the new law temporarily extends the carry-back period for net operating losses to five years, from two years. The provision applies to losses arising in taxable years ending in 2001 and 2002.

INFLATION ADJUSTMENTS. As is the case each year, tax brackets, standard deductions, personal exemptions, itemized deduction limitations and other key elements of the tax system are adjusted for inflation. Personal exemptions will be $3,000. The standard deduction will be $7,850 for Married Filing Joint, $4,700 for Single, and $6,900 for Head of Household filers, with deductions increasing for taxpayers over age 65. Tax rates above the 15% bracket drop one-half percentage point, and the 2002 tax tables incorporate the new 10% tax bracket.

ESTIMATED TAXES. Rules on estimated taxes have changed for 2002. Taxpayers with AGIs over $150,000 in 2001 must prepay at least 112% of 2001 tax liability, or 90% of the 2002 tax liability to avoid underpayment penalties. The percentage drops to 110% for 2002. Individuals with incomes of $150,000 or less in 2001 must prepay either 100% of their 2001 tax or 90% of the 2002 tax liability.

GIFT TAX EXCLUSION. The new law creates a one-million-dollar lifetime gift tax exclusion, beginning in 2002. The top gift tax rate will gradually decline. The annual gift tax exclusion is $11,000 for 2003. The exclusion applies to each person to whom you make a gift. Thus, an individual can give up to $11,000 in 2003 to another person without incurring a gift tax. (A married couple can give a total of up to $22,000 in 2003 tax-free to each donee.)

Faster Tax Refunds!!
Whether you e-file your tax returns, or send them in by mail, your refund can be deposited directly to your checking or savings account. With electronic direct deposit, you receive your money up to ten days faster than when a paper check is issued. Open your account at Farmers & Merchants State Bank today!!

Let Us Re-Introduce . . . Don Swartzbaugh!

Don Swartzbaugh,of Marietta, joined the F & M family in June of 1981. Don first served in the loan department as a loan officer and now serves as Vice President of Loans.

Don was born in the Bushnell area to George and Jean (deceased) Swartzbaugh, and graduated from B-PC High School and Western Illinois University with a Bachelors of Business Degree. He and his wife, Cindy, reside outside Marietta with their sons Drew and Spencer, and daughter Melissa lives in Davenport, Iowa.

Don serves as president of the Bushnell Chamber of Commerce, sits on the Bushnell Economic Development Board, Carl Sandburg College Foundation Board and B-PC Public School Foundation Board, and is a member of the New Philadelphia United Methodist Church.

When Don is outside the bank you may find him spending his spare time bowling (no pun intended!), golfing, farming, reading, and watching all kinds of sports. Rumor has it he’s even a Cardinal baseball fan, but we understand not everyone can be a Cub fan.

WHERE THERE'S A WILL THERE'S A WAY!
Although the percentage of Americans with wills has increased slightly in the past year, the majority still do not have a will, according to a new survey. This potentially leaves many people without any say over issues involving their assets or care of their children after they die. The surviving parent of minor children may find it necessary to go to court to be appointed guardian of their own children if the deceased parent dies without a valid will.

The survey of 1,000 American adults by legal website, Find Law.com, found that only 44.4 percent currently have a will. Many events, including the passage of estate tax reforms and threats of terrorist attacks, have persuaded many Americans to visit an attorney and establish a will.

Six percent of the surveyed people with wills have updated them within the last year. Experts stress the importance of setting up a will and updating it periodically, especially when there is a significant change in assets, marital status or number of children. New estate tax laws or a change in a person’s wishes for their estate also requires revising their will. Are you among those who still need to create a will?

FOR YOUR CONSIDERATION*. . .by Shirley Rapp

Toro Company (ticker TTC) is best known in the wintertime for its snowthrowers. However, Toro designs, manufactures and markets professional turf maintenance equipment, irrigation systems, landscaping equipment, agricultural irrigation systems, and residential yard products. TTC products include walk-behind and riding mowers, lawn and garden tractors, trimmers, portable heaters and lighting systems for homeowners, irrigation and aeration equipment for golf courses, and riding mowers for commercial and professional uses.

Minnesota-based Toro recently traded at $63.35 per share with a price-to-earnings (P/E) ratio of 14.5. The 52-week share price range was $45.50 to $68.30 per share. TTC pays an annual dividend of $.48 per share. Sales per share have increased in the last ten years from $52.75 to $116.40, and earnings-per-share during the same period increased from non-existent to $4.85. Toro’s long-term debt is $178.8 million with a debt-to-capital ratio of 33%; the company has issued no preferred stock and it has no pension liability.

Some analysts find this company’s profit prospects for the next five years quite appealing. For further information on Toro Company or any investment, please contact Shirley Rapp or any of the professionals of Trust-Mart® to help you implement your investment decisions.

*This column is informational only, with no investment advice given or intended. Investments in securities are not insured by the FDIC, and involve risk, including the possible loss of principal. All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. Before buying any security, its prospectus should be carefully read. Trust-Mart© is a full-service trust department of the Farmers and Merchants State Bank of Bushnell, Illinois.

FEBRUARY 17 - PRESIDENT'S DAY

Friends in Motion

Celebrating 70 years of marriage is a rarity, but apparently not so in Bushnell. Ray and Dorothy Calhoun celebrated their 70th in January, and Ted and Ethel Cox celebrate their 70th this month. In addition, Larry and Anna Kugler celebrated their 40th wedding anniversary. Our congratulations to every one of these Bushnell couples!

Bertha Pensinger of Marietta turned 90 in December and we’re sorry we missed it! We wish you a special belated happy birthday, Bertha!

Another active Pensinger is Bertha’s husband, George Pensinger, Sr. At age 91, George bowls at least twice a week and is one of the oldest people in McDonough County who bowls on a regular basis. That must be the secret to a long and healthy life!

December 14, 2002, Hannah Hogan (former Bushnell resident and great-niece of our own Becky White) competed in the United States Amateur Track and Field Junior Olympic Nationals in Carrollton, Georgia. Hannah finished 28th in a field of 319 runners in the 3 km Midget Girls class, and her team, the Illini Heat, finished 15th in a field of 36. Way to go, Hannah!