The 2003 Tax Act
Highlights of the recently passed tax act, The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)
The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)
HIGHLIGHTS OF THE CHANGES FOR INVIVIDUALS
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Capital Gains
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The maximum rate falls from 20% to 15% and the rate for lower income taxpayers is reduced from 10% to 5%. The former five year holding period is repealed. Applies to sales and exchanges between 5/6/03 and 12/31/07. In 2008 the 15% rate remains and the 5% drops to 0%. On 1/1/09 the rates return to 20% & 15%.
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Dividends
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Rates are reduced to 15% (5% for lower income taxpayers) for "qualifying" dividends received after 2002 and through 12/31/08. The 5% rate terminates 12/31/07 and is 0% in 2008. On 1/1/09 the previous rates return.
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Reduction of Tax Rates & Expansion of 10% Bracket
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Old rates: 10,15,27,30,35 & 38.6%
New rates: 10,15,25,28,33 & 35%
10% bracket increases to $7,000 for singles and $14,000 for married (increases are $1,000 & $2,000). Retroactive to 1/1/03. The rates return to 15,28,31,36 & 39.6% after 2010.
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Child Tax Credit
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Credit increased from $400 per child to $1,000. Refunds will be issued to taxpayers claiming the credit in 2002 beginning July 2003. Effective for 2003-2004. In 2005 credit falls to $700 but increases to $1,000 by 2010.
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Marriage Penalty
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The standard deduction and 15% bracket for married couples increases to twice the amount/rate for single taxpayers. Effective for 2003-2004. Falls to 180% of single amount in 2005 and increases to 200% by 2009.
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Alternative Mimimun Tax
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Exemptions are increased - single rises from $35,750 to $40,250 and married increases from $49,000 to $58,000. Effective for tax years 2003-2004.
HIGHLIGHTS OF THE CHANGES FOR BUSINESSES
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Asset Write-Off
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The amount eligible under Code Sec. 179 increases The previous limit of $25,000 per year has been increased to $100,000. The phase-out increases from $200,000 to $400,000. Effective for property placed into service 2003-2005. In 2004-2005 the amount is indexed for inflation.
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Bonus Depreciation
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The rate increases from 30% to 50%. As in the past, this applies only to the purchase of new property. Bonus depreciation on luxury autos rises from $4,600 to $7,650. Effective for property acquired after 5/5/03. Property under a binding contract in effect between 9/11/02 and 5/6/03 is eligible for the previous 30% rate.
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Estimated Tax Payments
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The estimate due on 9/15/03 has been extended to 10/1/03 for regular corporations. This applies to the 9/15/03 estimate only.
SUMMARY
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As with any new tax act, there are both exceptions to the rules and significant tax saving planning opportunities available. This is an excellent opportunity to plan and reduce your income taxes for 2003. Please call our office if you have any questions or want to take advantage of the new laws by meeting with us to design a tax plan specifically designed for you.
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