Nearly every American taxpayer will get a check this fall ranging from $300 to $600, thanks to the $1.35-trillion tax cut approved by Congress on Saturday.
However, the rest of the relief promised by the massive tax overhaul will take a lot longer to reach your pocketbook.
Some of the most generous tax cuts in the bill don't start until 2002. Others, including most of the breaks aimed at ending the so-called marriage penalty, don't kick in until 2005. Still other tax cuts phase in--and sometimes out--over 10 years, creating tax planning challenges for everyone.
"This isn't a onetime event," says Ed O'Connor, an expert on retirement and education savings at Merrill Lynch. "You can't take one look at your affairs and figure you can deal with it. This is going to be an ongoing process."
Many of the tax breaks in this bill are targeted to specific groups, such as married couples, parents of small children, people who are saving for college or retirement--even Holocaust victims. But because the breaks are phased in, some of today's targeted beneficiaries may never get to take full advantage.
For instance, the child tax credit eventually will climb to $1,000 for each child under the age of 17. But today's 10-year-olds will be too old to qualify for the credit by the time it's fully phased in in 2010.
Who gets what and when? Here's a look.
Tax Rates
The most contentious debate was over who gets lower tax rates, when they get them and how much lower their rates should go.
Congress opted for a two-tiered approach. A new 10% tax rate, applied to the first $6,000 to $12,000 earned by all taxpayers, goes into effect retroactively to the beginning of the year. Maximum benefit: $300 for singles, $600 for married couples and $500 for single parents.
To spur economic growth, the bill instructs the Treasury Department to send refund checks to American taxpayers by Oct. 1. However, those who filed late or got filing extensions may get their checks later.
Additional rate changes will kick in July 1. However, the changes will be incremental, with a 1 percentage point cut for all brackets starting this summer and another 1 percentage point cut starting in 2004. A third rate cut takes place in 2006.
The lower marginal rates could result in slightly bigger paychecks for all workers as the amount withheld for taxes shrinks starting this summer.
Estate Tax
