Federal Tax Alert

By The Curchin Group

On May 28, 2003, President Bush signed the Jobs & Growth Tax Relief Reconciliation Act of 2003 which enacted tax cuts affecting individuals and businesses. Below are important highlights. Some of the provisions are retroactive to January 1, 2003, while others take effect on May 6, 2003.

• Individual income tax rates are reduced for all taxpayers retroactive to January 1, 2003. Rates above the 15 percent bracket fall about two percentage points. For example, the highest rate, which was 38.6 percent, falls to 35 percent.
• The increased child tax credit has been accelerated to 2003. For 2003 and 2004 the credit increases to $1,000 for dependent children under age 17. In 2005, the credit is reduced to $700. Checks for the increased credit will be mailed starting in July.
• Tax rates on dividend income received by individuals from domestic or qualified foreign corporations will be taxed at a maximum rate of 15 percent (5 percent for individuals in 10 and 15 percent brackets).
• The maximum long-term capital gains rate was reduced from 20 to 15 percent on sales or exchanges on or after May 6, 2003. The current 10 percent capital gains rate for lower-income taxpayers falls to 5 percent.
• Marriage penalty relief immediately increases the standard deduction for married couples to $9,500. It also expands the 15 percent tax bracket to cover taxable income of up to $56,800.
• Alternative Minimum Tax (AMT) relief includes an increased exemption from $49,000 to $58,000 and $35,750 to $40,250 for joint and single filers, respectively.
• Business taxpayers can elect to immediately deduct the cost of qualified property as opposed to depreciating over a useful life. The expense limit has increased from $25,000 to $100,000 per year through 2005.
• The first year bonus depreciation has increased form 30 percent to 50 percent for qualified property acquired after May 5, 2003 and before January 1, 2005.
• The corporate estimated tax payments due on September 15, 2003 are required instead to be paid on October 1, 2003.

These tax cuts will significantly affect each taxpayer depending on their individual tax situations. We urge you to call us to review your particular situation. Visit our website at www.curchin.com for additional information and upcoming seminars.