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Jobs and Growth Tax Relief Reconciliation Act of 2003
The following is a brief summary of the more notable tax provisions of this act.
Many of the provisions in this new tax law are only temporary, applying to 2003 and 2004. After 2004, the provisions
enacted in the Economic Growth and Tax Relief Reconciliation Act of 2001 will once again become effective unless
changed by Congress again.
Child Tax Credit - For 2003 and 2004, the child tax credit increases from $600 to $1,000. For many taxpayers, the $400 increase has already been paid in advance. The amount of the 2003 child tax
credit that taxpayers can claim in 2003 will be reduced by the advance payment.
In 2005, the child tax credit is scheduled to fall back to $700, but will gradually rise to $1,000 by
2010 under the Economic Growth and Tax Relief Reconciliation Act of 2001.
Tax Brackets - Income levels for the 10 percent tax bracket are increased to $7,000 for single taxpayers and to
$14,000 for joint filers for 2003. In 2004, these income levels will be indexed for inflation. This
relief is temporary. The old thresholds of $6,000 and $12,000 will reappear in 2005.
New tax rates, retroactive to January 1, 2003 are 10, 15, 25, 28, 33, and 35 percent for individuals.
Marriage Penalty Relief - For 2003 and 2004, the standard deduction for married couples will increase to twice the amount of the standard deduction for single taxpayers. In 2005, the standard deduction for married taxpayers will fall back to 174 percent of the standard for single taxpayers, then gradually rise to double the amount by 2009.
For 2003, the standard deduction for single taxpayers remains at $4,750. The standard deduction
for married taxpayers will rise to $9,500. Married taxpayers filing a separate return will claim the
same standard deduction as a single person.
Capital Gains Rates - The maximum long-term capital gain tax rate drops from 20 percent to 15 percent. The current 10 percent
rate for lower income taxpayers drops to 5 percent.
These new rates are effective for sales and exchanges taking place on or after May 6, 2003, and
through December 31, 2007. The 15 percent rate continues in 2008. The lower rates apply for
both regular tax and alternative minimum tax purposes.
In 2008, the 5 percent rate for lower income taxpayers drops to 0 percent, but only for 2008. On
January 1, 2009, the 10 and 20 percent rates are reinstated.
The lower rates for property held five years or more is effectively repealed until 2009. These rates
were 18 percent (8 percent for lower income taxpayers). The 8 percent rate is repealed effective
May 6, 2003. Those taxpayers who would have qualified the 18 percent rate for sales in 2005-
2008 receive no additional benefit other than the lower 15 percent rate.
The maximum rate for long-term gains from the sale of some assets, such as collectibles,
remains at 28 percent. Unrecaptured Section 1250 gain remains unchanged at the maximum
25 percent.
Taxataion of Dividends - Dividends received by an individual shareholder from a domestic or qualified foreign corporation
will be taxed in the same manner as capital gain income. This translates to 15 percent for most
taxpayers and 5 percent for taxpayers at lower income levels.
Although this provision is retroactive to January 1, 2003, it is temporary, terminating on December
31, 2008. The 5 percent rate terminates on December 31, 2007 and falls to 0 percent for 2008.
This one-year break only applies to taxpayers in the 10 and 15 percent tax brackets.
Bonus Depreciation - The additional 30 percent bonus depreciation increases to 50 percent for qualifying property
placed in service after May 5, 2003 and before January 1, 2005. The definition of qualifying
property has not changed. Qualifying property must still be brand new property with a class life of
20 years or less. The new law increases the bonus depreciation amount that may be taken with
respect to passenger automobiles from $4,600 to $7,650.
The 30 percent bonus depreciation continues to apply to property purchased between September
11, 2001, and May 6, 2003.
Section 179 Expensing - For 2003, taxpayers can expense up to $100,000 in qualifying property. The phase-out threshold
increases from $200,000 to $400,000. For 2004 and 2005, this amount will be indexed for
inflation. The new law allows taxpayers to make or revoke a Section 179 expense election without
first obtaining the consent of the IRS.
For 2003-2005, taxpayers can expense off-the-shelf computer software under Section 179.
Alternative Minimum Tax (AMT) - For 2003 and 2004, the AMT exemption amount is increased to $58,000 for married taxpayers and
to $40,250 for unmarried taxpayers.
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