There are many advantageous tax changes for the 2003 tax year as a result of the Jobs and Growth Tax Relief Reconciliation Act of 2003, signed into law May 28, 2003. Canyon Tax & Bookkeeping Service is ready, willing, and able to help you determine which ones will affect your own tax return. The most significant benefits you'll notice are:
(for individuals)
reduction in the maximum capital gains tax rate on long-term capital assets from 20% to 15%; for those taxpayers in the 10% bracket the rate goes down to 5%; these new rules apply to sales after May 5, 2003 only
reduction in the tax rate for dividend income from ordinary income tax rates to a maximum of 15% for most taxpayers; taxpayers who are in the 10% and 15% brackets will pay tax on dividends at 5%
expansion of 10% individual tax rate bracket for single ($0 to $7,000) and joint filers ($0 to $14,000)
acceleration of upper tax rates reduction from 27% to 25%, 30% to 28%, 35% to 33%, and 38.6% to 35%
acceleration of marriage penalty relief by changing the joint filers' standard deduction, the 10% tax bracket, and the 15% tax bracket equal to 200% of the amount for single taxpayers
increase in the child tax credit from $600 to $1000 per child; you may have received checks from the IRS for advance payment, and that amount will be deducted from the credit on the 2003 return (if the advance payment exceeds the actual 2003 child tax credit the taxpayer gets to keep the money!); NOTE: child tax credit only for dependent child under age 17 at end of tax year!
increase in the AMT (Alternative Minimum Tax) exemption amounts from $35,750 for Single and Head Of Household to $40,250; from $49,000 for joint filers to $58,000; from $24,500 for Married Filing Single to $29,000; also included in the calculation for the AMT exemption are the new 50% special depreciation allowance and the lower qualified dividend income and long-term capital gain tax rates
increase in the maximum Child and Dependent Care Expense Credit from $2400 for one qualifying individual to $3000; from $4800 to $6000 for two or more qualifying individuals
decrease in safe harbor percentage for 2003 estimated payments, from 112% to 110% of AGI over $150,000 in 2002 (to avoid penalties for underpayment)
new regulations clarifying when home sellers are eligible for a reduced exclusion on capital gains tax for selling a home before the two-year requirement because of job relocation, health or unforeseen circumstances
increased elective deferral limits for 401(k) and 403(b) plans and SARSEPs from $11,000 to $14,000
continuance of the Educator Expenses "above-the-line" deduction for kindergarten through grade twelve teachers for up to $250 of classroom expenses (a special help to those taxpayers who use the standard deduction because they don't own a house, etc.)
continuance of the Tuition and Fees Deduction "above-the-line" for taxpayers who are paying tuition and required enrollment fees at accredited post-secondary institutions
(for businesses)
decrease in business mileage rate from $.365 per mile to $.36 per mile
increase in percentage of self-employed health insurance that is deductible as an adjustment to income from 70% to 100%
increase in annual expensing deduction (technically called Section 179 deduction) on new equipment from $24,000 to $100,000; this deduction also now applies to off-the-shelf software
increase in first-year bonus depreciation allowance from 30% to 50% for qualifying property, purchased and originally used after May 5, 2003
increase in the maximum luxury auto limits and special depreciation allowance from $7,660 to $10,710
increase in the maximum depreciation allowance for new trucks and vans from $7,660 to $11,010 (trucks, vans, and SUVs are now in separate category)
