New 2003 Law

2002 Law

Credit = $1,000 per qualifying child

This will be effective in 2003 and 2004.

Rebate checks will be sent out for the 2003 credit, starting in July 2003, based on 2002 tax returns filed in 2003.

A qualifying child is:

·        under age 17

·        a son, daughter (or other descendent), step child, or eligible foster child

·        allowed as a dependent of the taxpayer

·        a U.S. citizen or resident

Result: Lower tax bills and/or rebate checks of up to $400 per child. The credit begins to phase out for taxpayers with adjusted gross incomes over:

·        $110,000 (for married taxpayers filing jointly)

·        $75,000 (for unmarried individuals), and

·        $55,000 (for married taxpayers filing separately). 

Credit = $600 per qualifying child

New 2003 Law

2002 Law

For taxpayers who are 1) married, 2) filing jointly, and 3) claiming the standard deduction:

·        increase the amount of the standard deduction to $4,750 (exactly twice that of single taxpayers)

The standard deduction for taxpayers who are married but file separately is the same as for single filers.

This will be effective in 2003 and 2004.

Result: Lower tax bills for married couples that claim the standard deduction (and don’t itemize) because the amount of the standard deduction is increased.

The standard deduction for two single filers ($9,500) is greater than the standard deduction for a married couple filing a joint return ($7,950). 

The standard deduction for taxpayers who are married filing separately is $3,975.

New 2003 Law

2002 Law

Increase the size of the 15% tax bracket for married couples filing joint returns to twice that of the 15% bracket for single filers.

This change will be effective in 2003 and 2004.

Result: Lower tax bills for married couples because more income will be taxed at the lower 15% rate.

The 15% bracket for taxpayers who are married and filing jointly ends at $47,450 (and $23, 725 for those who are married filing separately).

New 2003 Law

2002 Law

This change will be effective in 2003 and 2004.

The bracket will be adjusted in 2004 for inflation.

Result: lower tax bills because more income will be taxed at the lowest rate.

New 2003 Law

2002 Law

Accelerate tax rate reductions that were scheduled for 2004 & 2006.

Result: Lower tax bills for those in the top four tax brackets because rates have been cut at least two percentage points per bracket. Those who will benefit in 2003 are taxpayers with incomes over:

·        $28,400 (single)

·        $56,800 (married filing jointly, and qualifying widow(er)s)

·        $38,050 (head of household), and

·        $28,400 (married filing separately)

New 2003 Law

2002 Law

Increase the Alternative Minimum Tax (AMT) exemption amount.

This change will be effective in 2003 and 2004.

Result: Taxpayers that would be subject to the AMT as a result of newly lower regular tax rates are given additional protection from this parallel tax.

New 2003 Law

2002 Law

Additional 1^st year (bonus) depreciation = 50%.

This increase would apply to business property that is currently eligible for 30% bonus depreciation and is placed in service after May 5, 2003 and before January 1, 2005.

This is effective for taxable years ending after May 5, 2003.

Result:  Lower tax bills for people that purchase cars and equipment used in business because the cost can more immediately be written off as an expense. 

Note: Many states do not recognize bonus depreciation.

Additional 1^st year (bonus) depreciation = 30%.

New 2003 Law

2002 Law

The annual Section 179 expense amount = $100,000 (for qualified property placed into service in 2003, 2004, and 2005.

The amount of eligible property that may be placed in service before taxpayers start to lose the ability to claim this deduction = $400,000 per year.

The dollar limits will be indexed annually for inflation after 2003 and before 2006.

Off-the-shelf computer software placed in service during 2003 through 2005 will now be eligible for section 179 deduction treatment.

This proposal now allows taxpayers to make or revoke section 179 expensing elections (for taxable years beginning in 2003 through 2005) on amended returns without the consent of the IRS. This means that a taxpayer could potentially offset additional income reported on an amended tax return with a section 179 deduction.

This change is in effect for tax years beginning after December 31, 2002.

Result: Lower tax bills for people that purchase cars and equipment used in business because the cost can more immediately be written off as an expense.

The annual Section 179 expense amount = $25,000.

The amount of eligible property that may be placed in service before taxpayers start to lose the ability to claim this deduction = $200,000 per year.

A section 179 deduction can only be claimed on an originally filed return (not on amended returns).

New 2003 Law

2002 Law

The maximum tax rates that are levied on adjusted net capital gains = 5% (for taxpayers in the 10 & 15% brackets; this goes down to 0% in 2008) and 15%.

This change applies to capital assets that are held more than one year and sold or exchanged at a gain (including any installment payments received) on or after May 6, 2003 and before January 1, 2009.

The lower rates would apply to both regular tax and the Alternative Minimum Tax.

Result: Lower tax bills for those who sell property, stocks, or mutual funds because long term capital gains are taxed at lower rates.

The maximum tax rates that are levied on adjusted net capital gains = 10% and 20%.

New 2003 Law

2002 Law

The amount of tax that is levied on an individual’s qualifying dividends is 5% (for taxpayers in the 10 & 15% brackets) or 15% (depending upon income).

Dividends received by an individual from domestic and qualified foreign corporations are eligible for this tax break.

This applies to regular tax as well as Alternative Minimum Tax (AMT).

The proposal is effective from 2003 through 2008.

Result: Lower tax bills because qualifying dividends are taxed at lower rates.

The amount of tax that is levied on an individual’s qualifying dividends is as high as 38.6% (depending upon income).

New 2003 Law

2002 Law

25% of the corporate estimated quarterly tax payments due on September 15, 2003 don’t have to be paid before October 1, 2003.

Result: Deferral of a portion of corporate estimated tax payments.

Corporate estimated quarterly tax payments are due on September 15, 2003.