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Tax Law Changes for Individuals
Public Law 108-27, The Jobs and Growth Tax Relief
Reconciliation Act of 2003, was signed by President Bush on
May 28, 2003. Described below are the major changes made by the new law
that affect tax years beginning in 2003. Be sure to take these changes
into account when figuring any future estimated tax payments due for 2003.
- The
2003
Tax Rate Schedules have been revised to reflect the following
changes.
- The tax rate brackets of 27%, 30%, 35%, and 38.6%, have been
reduced to 25%, 28%, 33%, and 35%, respectively.
- The 15% rate bracket for married taxpayers filing jointly and
qualifying widow(er)s has expanded to twice that of single filers.
- The maximum taxable income subject to the 10% tax rate has
increased to $7,000 for single taxpayers and married taxpayers filing
separately ($14,000 for married taxpayers filing jointly and
qualifying widow(er)s).
- The basic standard deduction for married taxpayers filing jointly
and qualifying widow(er)s has increased to $9,500 (twice that of single
filers). The standard deduction for married taxpayers filing separately
has increased to $4,750 (the same as that of single taxpayers).
- The maximum child tax credit has increased from $600 to $1,000 per
child. Beginning on July 25, 2003, checks will be mailed to taxpayers
who claimed the child tax credit for 2002. The checks are an advance
payment of the increased portion of the child tax credit for 2003, up to
a maximum of $400 per child, and will be based on 2002 tax return
information using the number of qualifying children under age 17 as of
December 31, 2003. No action is required by any taxpayer to receive an
advance payment check. The checks will be mailed to qualifying taxpayers
on the dates shown in the
Mailing Schedule for Advance Child Tax Credit Payments . The advance
payment reduces the amount of the child tax credit allowed for 2003. Any
advance payment that is more than the child tax credit for 2003 does not
have to be paid back.
- The alternative minimum tax exemption amount has increased to
$40,250 for single taxpayers and taxpayers filing as head of household;
$58,000 for married taxpayers filing jointly and qualifying widow(er)s;
and $29,000 for married taxpayers filing separately.
- The maximum tax rate on net capital gain (i.e., net long-term
capital gain reduced by any net short-term capital loss) has been
reduced from 20% to 15% (and from 10% to 5% for taxpayers in the 10% and
15% tax rate brackets) for property sold or otherwise disposed of after
May 5, 2003 (and installment sale payments received after that date).
The reduced rate applies for both the regular tax and the alternative
minimum tax. The higher rates that apply to unrecaptured section 1250
gain, collectibles gain, and section 1202 gain have not changed.
- The same 15% (or 5%) maximum tax rate that applies to net capital
gain also applies to dividends paid by most domestic and foreign
corporations after December 31, 2002. Certain dividends from regulated
investment companies (such as mutual funds), real estate investment
trusts, and certain foreign corporations do not qualify for the reduced
rates. The 2003 Form 1099-DIV and 2003 Instructions for Form 1099-DIV
will be reissued in June 2003 to add a box for the reporting of
qualified dividends subject to the reduced rates.
Tax Law Changes for Businesses
Public Law 108-27, The Jobs and Growth Tax Relief Reconciliation Act
of 2003, was signed by President Bush on May 28, 2003. Described
below are the major changes made by the new law that affect tax years
beginning in 2003. Be sure to take these changes into account when
figuring any future estimated tax payments due for 2003.
All Businesses, Including Self-Employed
- The special first-year depreciation allowance has been increased
from 30% to 50% for qualified property acquired after May 5, 2003
(except for property acquired under a binding written contract in effect
before May 6, 2003). Instead of claiming the 50% allowance, taxpayers
may elect to claim the 30% allowance or elect not to claim any special
allowance. The depreciation limit for vehicles subject to the 50%
allowance is increased by $7,650. The 2002 Instructions for Form 4562
will be reissued in June 2003 for use by fiscal year 2002-2003 filers to
reflect the increase in the special allowance.
- The limit on the section 179 expense deduction is increased to
$100,000 for qualified property ($135,000 for qualified zone property,
qualified renewal property, or qualified New York Liberty Zone
property). This limit is reduced by the amount by which the cost of
section 179 property placed in service during the year exceeds
$400,000. Also, the definition of section 179 property has been
expanded to include off-the-shelf computer software.
Corporations
- The installment due date for 25% of any corporate estimated tax
payment otherwise due in September 2003 has been changed to October 1,
2003. The due date for the remaining 75% of the September 2003
estimated tax payment has not changed.
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