Summer Issue 2003
THE NEW TAX LAW
Dividend and Capital Gains Tax Reduction
Qualifying dividends (Paid by a U S corporation or certain "qualified Foreign corporations") will now be added to net capital gain and taxed at the same rates as long-term capital gains.
The actual tax rate at which dividends and long-term capital gains are to be taxed will depend on your tax bracket (see table below). Short-term capital gains will continue to be taxed at ordinary tax rates. Previous 2003-2007 2008 2009 +
Top Ordinary Rates of 25% and higher 20%/18% 15% 15% 20%/18%
Bottom Ordinary Rates of 10% and 15% 10%/8% 5% 0% 10%/8%
Generally investment interest (e.g., margin interest) is deductible up to the amount of investment income. However, any dividend that takes advantage of this preferential tax treatment is excluded from this definition of investment income.
Acceleration of Tax Rate Reductions
The top four marginal income tax brackets that were scheduled to decline in 2004 and again in 2006 have been accelerated under the "Jobs and Growth Tax Relief Reconciliation Act of 2003" (see table below).
27% rate 30% rate 35% rate 38.6% rate
Calendar Year Changes to: Changes to: Changes to: Changes to:
2003-2010 25% 28% 33% 35.0%
2011 28% 31% 36% 39.6%
Acceleration of Marriage Tax Penalty Phase-Outs
Under the new law, these phases-out amounts have been accelerated for the years 2003 and 2004 to provide that the standard deduction will be two times the basic standard deduction for a single individual. For tax years 2005 and beyond, the phase-outs revert to those that were enacted in 2001, which would increase gradually to two times the standard deduction for single taxpayers from 2005 to 2009.
Increase in AMT Exemption Amount
As a result of lower marginal income tax brackets, more taxpayers may find themselves subject to the alternative minimum tax (ATM).
Effective for the tax years 2003 and 2004, the AMT exemption amount for joint filers will increase from $ 49,500 to $ 58,000 and from $ 35,750 to 40,250 for single filers. Following the 2004 tax year, the AMT exemption amounts will revert to the year 2000 amounts ($45,000 for joint filers and $ 33,750 for single filers).
Acceleration of Child Tax Credit Increase
The child tax credit was originally scheduled to increase to $ 1,000 over a 10-year period. The new tax law temporarily accelerates the increase to $ 1,000 for tax years 2003 and 2004 before reverting to the pervious schedule. Eligibility for the credit is based on your adjusted gross income, which begins to phase out at $ 110,000 for joint filers and $ 75,000 for single filers.
FEDERAL SAFETY RESEARCH ALERT
Warehouse-type employers have been informed about the grater risks faced by younger fork-lift operators compared to those of more experienced employees. While the lack of training often is to blame for forklift accidents, chances of injury are greater for younger workers, who tend to have a diminished perception of risk and an exaggerated perception of their ability to control a hazardous situation.
Because tax laws are complex and often change, you should consult with this office or your tax advisor in addition to reading the information in this document. The information presented is intended to inform and alert the reader of tax, accounting and other items of interest, but since it is presented in abbreviated form and not all-inclusive, it should be implemented only upon in-depth consultation with your appropriable advisors. Also contact referenced venders or online resources for additional specific information and application.
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