The Job and Growth Tax Relief Act of 2003

        Key Provisions of New Law - May 2003

    The new law makes the following changes:

• Capital Gains and Dividends: The highest tax rate on capital gains and dividends was lowered to 15% for 2003-08 with taxpayers in lower income brackets paying 5% on capital gains and dividends in 2003-07, and no taxes on such income in 2008. The capital gains relief is effective as of May 6, 2003 , while the dividends provision is effective as of January 1, 2003 ; both are scheduled to expire at the end of 2008.

• Small Business Expensing: §179 small business expensing was increased from $25,000 to $100,000 with the phase-out threshold level from raised from $200,000 to $400,000 for property in service in taxable years beginning in 2003, 2004, and 2005.

• Depreciation Bonus: The depreciation bonus established under the Job Creation and Workers Assistance Act of 2002 was extended and increased to 50% for property that was acquired after May 5, 2003 , and before January 1, 2005 .

• Child Tax Credit: The child tax credit was increased to $1,000 in 2003 and 2004. This increase includes advance rebates of up to $400 per eligible child. Bush said checks will be mailed out to eligible taxpayers beginning in July.

• 10 Percent Income Bracket: An already approved increase in the 10% income tax bracket was accelerated, making it effective in 2003 and 2004.

• Marginal Rate Reductions: Marginal rate reductions scheduled under a 2001 law to take place in 2004 and 2006 were accelerated to 2003.

• Marriage Tax Relief: Marriage tax relief called for under a 2001 law, including an increase in the state deduction and expansion of the 15% income bracket, effective for 2003-04, was accelerated to 2003.

• Alternative Minimum Tax: The alternative minimum tax exemption amount was increased to $58,000 for married couples filing joint returns, $40,250 for single filers, and to $29,000 for married individuals filing a separate return for taxable years beginning in 2003 and 2004.

Withholding

IRS Issues New Tax Withholding Tables, Information on Child Credit Advance Checks

The IRS May 28 issued new tax withholding tables and information on changes to the child tax credit in light of the tax breaks in the Jobs and Growth Tax Relief Reconciliation Act (P.L. 108-27) that President Bush signed into law the same day.

The new tables were released as Notice 1036, and will appear in an updated Publication 15-T, New Withholding Rates, scheduled to be mailed to employers by June 18. Employers should use the new tables for wages from now through the end of 2004, the IRS said in an accompanying news release (IR-2003-69).

The IRS said it plans to expand the notice May 30 to include: wage bracket method income tax withholding tables; formula tables for percentage method withholding; wage bracket percentage method tables; combined income tax, employee Social Security tax, and employee Medicare tax withholding tables; and tables for withholding distributions of Indian gaming profits to tribal members.

The new tax bill accelerates reductions in income tax rates in excess of 15% that were to take effect in 2004 and 2006. New rates of 25%, 28%, 33%, and 35% will go into effect in 2003, down from 27%, 30%, 35%, and 38.6% currently.

The changes benefit married couples with taxable income greater than $47,450 and single taxpayers with income greater than $28,400.

The expansion of the 10% tax bracket, originally scheduled to go into effect in 2008, would take effect for 2003 and 2004. The endpoint of the bracket goes from $12,000 of taxable income to $14,000 for married taxpayers and from $6,000 to $7,000 for single taxpayers.

Child Tax Credit to Be Advanced

The law also accelerated the increase in the maximum child tax credit to $1,000 for 2003 and 2004, and instructed the Treasury Department to provide advance payment this summer.

The IRS announced in a separate news release (IR-2003-68) May 28 that, beginning in the last week of July, eligible taxpayers who claimed the child tax credit on their 2002 tax returns will automatically receive an advanced payment of the 2003 increase in the credit.

The advance could net taxpayers up to $400 per qualifying child. About 25 million of the advance checks will be mailed this year, starting with principal mailings July 25, August 1, and August 8.

The IRS issued a fact sheet (FS-2003-13) and set of frequently asked questions and highlighted the fact that taxpayers need not take any action to receive the child credit advance.

The links below will provide a more detailed explanation of the Act

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