October 2004
Volume 1, Number 1
Table of Contents
Taxation:
Summary of the Jobs and Growth Tax Relief Reconciliation Act of 2003

The American College, Bryn Mawr, PA

ACCELERATION OF TAX REDUCTIONS

Child credit

• Increases credit to $1,000 for 2003 and 2004 (reverts to current-law levels after 2004). For 2003, the increased amount (up to $400) will be paid in advance, starting July 2003, based on the 2002 tax return.

Marriage penalty relief

For 2003 and 2004 only, for married taxpayers filing jointly (reverts to current-law levels after 2004):

• Increases the basic standard deduction for these taxpayers to twice the basic deduction for single persons.

• Increases the size of the 15-percent regular income tax bracket for these taxpayers to twice the width of the 15-percent regular income tax rate bracket for single returns.

Individual income tax rates

• For 2003 and 2004 only, increases the taxable income levels of the 10-percent rate bracket so income levels scheduled for 2008 become effective in those years.

• For 2003, the 10-percent tax bracket increases from $6,000 to $7,000 for single taxpayers and from $12,000 to $14,000 for married taxpayers; for 2004, these amounts are indexed for inflation.

• For 2003 and thereafter, accelerates reductions in regular income tax rates slated for 2004 and 2006. Regular income tax rates in excess of 15 percent will now be 25 percent, 28 percent, 33 percent, and 35 percent.

• For 2003 and 2004 only, increases the alternative minimum tax exemption for married taxpayers filing jointly and surviving spouses to $58,000, and for unmarried taxpayers to $40,250.

GROWTH INCENTIVES FOR BUSINESS

First-year depreciation

• Increases to 50 percent the additional first-year depreciation on the adjusted basis of qualified property (as defined for the 30-percent additional deduction in the Job Creation and Workers Assistance Act of 2002). Property must be acquired after May 5, 2003, and before January 1, 2005.

Section 179 expensing

• Increases the maximum dollar amount that may be deducted under Section 179 to $100,000 for property placed in service in taxable years beginning 2003, 2004, and 2005.

• For purposes of the phaseout of the $100,000 deductible amount, increases the $200,000 amount of Section 179 property at which the phaseout begins to $400,000 for property placed in service beginning in these years.

• Indexes dollar limits annually for inflation for these tax years.

• Includes off-the-shelf computer software placed in service in these taxable years as qualifying property.

TAX RATE REDUCTIONS-CAPITAL GAINS AND DIVIDENDS

• Reduces 10- and 20-percent tax rates on capital gains to 5 (0, in 2008) and 15 percent, respectively. Applies to regular tax and alternative minimum tax, and to assets held more than 1 year, for sales/exchanges (and payments received) from May 6, 2003, through December 31, 2008.

• Reduces the ordinary income tax rates on dividends received by individual shareholders from domestic and qualified foreign corporations to 5 (0, in 2008) and 15 percent. Applies to both the regular tax and alternative minimum tax, for dividends in taxable years beginning after 2002 and through 2008.

©2004 The American College. All rights reserved.

 

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