Publication 3991: Highlights of the Job Creation and Worker Assistance Act of 2002; Tax Changes for Individuals

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

2001 Changes

New 5-Year Carryback Rule for
Net Operating Losses (NOLs)

If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). However, you can still choose to use the previous carryback period. You also can choose not to carry back an NOL and only carry it forward.

Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. The instructions for this form will be revised to reflect the new law.

The wash sale rules that generally apply to losses from the sale of stock or securities, do not apply to any loss arising from a section 1256 contract.

Wash sales and section 1256 contracts are explained in detail in Publication 550, Investment Income and Expenses.

If you are an eligible educator, you can deduct as an adjustment to income up to $250 in qualified expenses. You can deduct these expenses even if you do not itemize deductions on Schedule A (Form 1040). This adjustment to income is for expenses paid or incurred in tax years beginning during 2002 or 2003. Previously, these expenses were deductible only as a miscellaneous itemized deduction subject to the 2% of adjusted gross income limit.

Eligible educator.

You are an eligible educator if, for the tax year, you meet the following requirements.

You are a kindergarten through grade 12:
1. Teacher,
2. Instructor,
3. Counselor,
4. Principal, or
5. Aide.
You work at least 900 hours during a school year in a school that provides elementary or secondary education, as determined under state law.

Qualified expenses.

These are unreimbursed expenses you paid or incurred for books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials that you use in the classroom. For courses in health and physical education, expenses for supplies are qualified expenses only if they are related to athletics.

To be deductible as an adjustment to income, the qualified expenses must be more than the following amounts for the tax year.

The interest on qualified U.S. savings bonds that you excluded from income because you paid qualified higher education expenses,
Any distribution from a qualified tuition program that you excluded from income, or
Any tax-free withdrawals from your Coverdell education savings account.

The provision that allowed certain nonrefundable personal credits to reduce both your regular tax and any alternative minimum tax (AMT) has been extended and will be in effect for 2002 and 2003. This provision, as it applies to the AMT, was originally scheduled to expire after 2001. Without the extension, these credits could not have been used to reduce any AMT in 2002 or 2003.

For the purpose of figuring the child and dependent care credit, your spouse is treated as having at least a minimum amount of earned income for any month that he or she is a full-time student or not able to care for himself or herself. Beginning in 2003, this amount is increased to $250 a month if there is one qualifying person and to $500 a month if there are two or more qualifying persons. Before 2003, the amounts were $200 and $400. The same rule applies for the exclusion of employer-provided dependent care benefits. For more information about the credit and exclusion, see Publication 503, Child and Dependent Care Expenses.