>By factoring in the new provisions, many taxpayers should be able to slash their payments for the rest of 2003, according to a SmartPros report. According to the SmartPros story, the biggest impact for many Americans will come from the lower federal rates:
- the 10% rate applies to the first $7,000 of taxable income for single persons, $14,000 for married persons filing jointly and qualifying widow(er)s
- the 15% rate for joint filers and qualifying widow(er)s covers up to $56,800 of taxable income
- rates above 15% are lowered to 25%, 28%, 33% and 35%
- the maximum rate is 15% for qualified dividends for 2003 and for net capital gain on sales and installment sale payments received after May 5, 2003. But a 5% rate applies to gains or dividends that would have otherwise been taxed at a regular rate of 10% or 15 %. (There are no changes in the special rates for unrecaptured section 1250 gain, collectibles gain, or section 1202 gain.)
More Tax Changes
>In addition to the tax rates, other key changes include:
- a higher standard deduction for married persons: $9,500 for joint returns, $4,750 for a married person filing separately.
- a higher alternative minimum tax exemption amount: $40,250 for a single person or a head of household; $58,000 for married persons filing jointly or qualifying widow(er)s; and $29,000 for a married person filing separately.
- the limit on the section 179 deduction for business expenses rises to $100,000 and the deduction phase out does not apply until qualifying expenses exceed $400,000. Off-the-shelf computer software now qualifies as section 179 property.
- The special first-year depreciation allowance rises from 30% to 50% for qualified property acquired after May 5, 2003. However, a taxpayer may choose to claim the 30% rate or even to not claim any special allowance. The depreciation limit for vehicles subject to this 50% allowance increases by $7,650.
>A significant break that people should generally not factor in when figuring estimated taxes is the increased Child Tax Credit amount for 2003. Most parents who claimed that credit last year will get the increase later this summer in a check for up to $400 per qualifying child. The IRS will automatically determine the proper amount based on the 2002 return.
>The Treasury noted the new bill just passed by the US Senate, the Relief for Working Families Tax Bill of 2003, would provide for approximately seven million additional advance child tax credit checks, which would force a second round of checks that could not be issued until mid-September.
The IRS Web site has an overview of key changes to be considered, the new tax rate schedules to be used, and worksheets in Publication 505, “Tax Withholding and Estimated Tax,” for computing special items. Go to http://www.irs.gov/newsroom/article/0,,id=109951,00.html .