PacWest Financial Management, Inc. - Jobs and Growth Tax Relief Reconciliation Act of 2003

Jobs and Growth Tax Relief Reconciliation Act of 2003: Highlights

Acceleration of the reduction in personal income tax rates
The lower marginal rates scheduled to be implemented in 2006 (under the 2001 Tax Act) are now in effect, retroactive to the beginning of 2003.

Margin Tax Rate Comparison

Additionally, in 2003 the 10 percent bracket applies to the first $7,000 of adjusted gross income (AGI) for single individuals, $14,000 for married couples filing jointly (up from $6,000 and $12,000). These amounts, indexed for inflation, will apply to the 2004 tax year as well.* For the 2003 and 2004 tax years, the 15 percent bracket for married individuals filing jointly is twice that of single individuals. For 2003, the 15 percent bracket will apply to married individuals filing jointly with taxable income greater than $14,000, up to $56,800 (previously this bracket applied to income of $12,000 to $42,450).*

Child Credit Comparison Increase in the child credit*

For each qualifying child, the child credit is increased from $600 to $1,000 for 2003 and 2004. Advance payment checks will be mailed to qualifying individuals for 2003. The credit is still reduced for couples filing jointly with income over $110,000, for singles with income over $75,000, and for married individuals filing separately with income over $55,000.

Capital Gains Tax Comparison Capital gains tax rate reduction
The 20 percent long-term capital gains tax rate has been reduced to 15 percent for long-term (over 1 year) gains realized after May 5, 2003 and before January 1, 2009. For individuals in the 10 percent and 15 percent marginal tax brackets, the rate is now 5 percent, except for tax year 2008, when the rate will be zero.

Dividends tax rate reduction
Dividends received from U.S. and qualified foreign corporations will generally be taxed at the capital gains rate of 15 percent for those in tax brackets over 15 percent (5 percent for those in the 15 percent or lower brackets, reduced to zero in 2008). Previously, dividends were taxed as ordinary income, at rates up to 38.6 percent (in 2002). This change is effective for dividends received in 2003 through 2008.

*Changes are for 2003 and 2004 only. Beginning with tax year 2005, prior law applies.

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