New Tax Law Changes
Summary of the Jobs and Growth Tax Relief Reconciliation Act of 2003
1. Accelerated Business Depreciation
·Section 179 election limit increases to $100,000 for 2003. It further increases by inflation for 2004 and 2005.
·The Section 179 election will be allowed on an amended return for 2003, 2004, and 2005.
·Off–the-self software will qualify for the election.
·Bonus depreciation jumps from 30% to 50% for purchases after May 6, 2003 and before January 1, 2005.
·Maximum bonus depreciation for vehicles increased to $7,650.
2.Lower Tax Rates for Capital Gains Income
·Rates drop from 20% to 15%. And from 10% to 5% for the respective income levels.
·For 2008 a one-year change will be a 0% instead of the 5% rate.
·The five-year property tax rate is nullified through year 2008.
3.Lower Tax Rates for Dividend Income
·Dividend income will now receive tax treatment much like capital gains income. Lower rates and incremental brackets for those rates.
·15% maximum tax rate and 5% for the respective income levels.
·For 2008, and only 2008, the lower 5% rate will change to 0%.
·Exceptions to the definition of qualified dividend income apply to REIT and regulated investment companies. Other detailed exceptions also exist. But for regular people investing in corporate stocks, their dividend income will be taxed at lower rates than their wages.
4.Lower Marginal Tax Rates
·The Law Accelerates Implementing the Regular Tax Rates Previously Scheduled for 2006. The old rates going to the new rates are:
a.38.6 to 35
b.35 to 33
c.30 to 28
d.27 to 25
e.15 to 15
f.10 to 10
·The 10/15% threshold changes from $6,000 to $7,000 for $50 of tax savings.
5.Increased Child Tax Credit
·The credit increases from $600 to $1,000 for 2003 and 2004.
·For 2005 it changes to $700, and then back to $1,000 in 2010.
·An advanced ‘rebate’ check will be sent to eligible parents starting in July, 2003.
·Phase-outs for higher incomes continue to be in place.
6.Marriage Penalty is Eliminated
·For 2003 and 2004, the standard deduction for married couples will be twice the standard deduction for individuals.
·Marginal tax rate brackets for married people are now double the brackets for individuals.
7.Alternative Minimum Tax exemption amount increased.
For those of you not seeing it right off the bat, there are some HUGE tax planning opportunities hidden in the new laws.
See your accountant BEFORE next year to plan for it and take advantage of the new laws.
There really are two tax systems:
one for the informed and
one for the uniformed. . .