The Jobs and Growth Tax Relief Reconciliation Act of 2003 contains some splashy big tax cuts that will keep payroll accountants busy this summer, as well as a new rebate plan and tax incentives for small businesses.
Key components of the new law include:
- Acceleration of reductions in the marginal tax rates as originally provided by the Economic Growth and Tax Relief Reconciliation Act of 2001. New tax rates are retroactive to January 1, 2003 and will be reflected in changed withholding tables that are available now and are to be implemented no later than July 1, 2003.
- Elimination of the marriage penalty by increasing the 15% tax bracket and the standard deduction for married taxpayers filing joint returns, effective for 2003 tax returns.
- Increase in the child tax credit from $600 to $1,000, effective for 2003 tax returns. A rebate program scheduled for summer 2003 will provide approximately 25 million taxpayers with early access to the additional $400 per child credit.
- Decrease in the tax rate on long-term capital gains to 15% (5% for taxpayers in the 10% and 15% tax brackets).
- Decrease in the tax rate on dividend income to match the capital gain tax rate.
- Changes to the rules for alternative minimum tax that will decrease the number of taxpayers who are required to pay this tax.
- Small businesses are entitled to an increase to $100,000 of the amount of annual deduction allowed for section 179 property for the years 2003 through 2005.
Many of the new provisions are temporary and will require another act of Congress if they are to be made part of the permanent tax structure.