The new law contains $330 billion of tax cuts plus $20 billion in
aid to the states.
On May 28, President George W. Bush signed the 2003 tax bill. The new law contains $330 billion of tax cuts plus $20 billion in aid to the states.
Here are the major changes you can expect.
– Cuts in tax rates.
Rates in each of the top four tax brackets drop by 2 percent or more retroactive to Jan. 1, 2003.
The bottom 10-percent bracket expands by $1,000 for singles and $2,000 for married couples.
Expect to see lower withholding from your paycheck beginning in July.
– Increase in child tax credit.
The child tax credit increases from $600 to $1,000 per child for 2003 and 2004.
To help boost the economy, the IRS will pay the 2003 increase in advance by mailing checks to eligible taxpayers.
If you qualify based on your filed 2002 tax return, expect to receive a check for up to $400 per child in late summer.
– Lower taxes on dividends and capital gains.
The top rate on most dividends and long-term capital gains drops to 15 percent.
Currently, dividends are taxed at ordinary income rates and most capital gains are at 20 percent.
If you’re in the lower two tax brackets, the new rate on dividends and capital gains will be 5 percent through 2007 and 0 percent in 2008.
Rates will revert to the pre-2003 law levels in 2009. The new rates apply to dividends received in 2003 and to capital gains realized after May 5, 2003.
– Business investment incentives.
From 2003 through 2005, small businesses can take an immediate tax write-off for up to $100,000 of most equipment purchases each year. The previous limit for 2003 was $25,000.
All businesses can also claim a first-year bonus depreciation of 50 percent of the cost of new equipment purchased from May 6 until Dec. 31, 2004.
– Other provisions.
The law also provides limited relief from the marriage penalty and the alternative minimum tax.
For further details on the new law or assistance with your tax planning, contact our office.
– Mary Hubbell is the accounting manager with the accounting and business consulting firm of Bianchi, Lorincz & Co. in downtown Hollister.