The maximum capital gains tax rate is reduced from 20% to 15% for capital gains realized on or after May 6, 2003 and through December 31, 2008.  Beginning in 2009, the maximum capital gains rate reverts to 20%.  For taxpayers in the 10% and 15% tax brackets, the capital gains rate is reduced from 10% to 5% for capital gains realized on or after May 6, 2003 and through December 31, 2007, and to zero percent in 2008.  On January 1, 2009, the 10% capital gains rate returns.

Beginning with dividends paid in 2003, dividends paid by corporations to individuals are taxed at the new, lower capital gains tax rates (15% or 5%) retroactive to the beginning of the year.  Effective January 1, 2009, dividends will again be taxed at ordinary income tax rates.

The reductions in income tax rates in excess of 15% scheduled for 2004 and 2006 are accelerated to 2003, resulting in new rates of 25%, 28%, 33% and 35% (from 27%, 30%, 35% and 38.6%).  These reductions are retroactive to January 1, 2003, but are also subject to EGTRRA's sunset provision under which income tax rates revert to 15%, 28%, 31%, 36% and 39.6% after 2010.

The expansion of the 10% bracket scheduled for 2008 is accelerated to apply in 2003 and 2004.  The threshold for the 10% bracket increases from $12,000 of taxable income to $14,000 for married couples and from $6,000 to $7,000 for single taxpayers.  Again, however, there is a reversion involved.  The old thresholds reappear in 2005, but only temporarily.  Due to EGTRRA provisions, the $14,000 and $7,000 thresholds reappear in 2008.

The amount of the child tax credit is increased from $600 to $1,000, accelerating the previous phase-in scheduled between 2005 and 2010.  Again the relief is temporary, applying only in 2003 and 2004.  Beginning in 2005, the old EGTRRA schedule returns, providing a $700 child tax credit in 2005 which increases back to $1,000 by 2010.

In addition, the $400 increase in the 2003 child tax credit will be paid in advance, beginning in July 2003, based on information in the taxpayer's 2002 tax return.  This means, of course, that taxpayers will only be able to deduct a $600 child tax credit on their 2003 tax returns, but the hope is that taxpayers will spend the advance payment immediately, helping the economy recover.

The standard deduction for married couples is increased to double the amount of the standard deduction for single taxpayers - from $7,950 to $9,500 - in 2003 and 2004.  In addition, the "width" of the 15% tax bracket for married couples is increased to twice that for single taxpayers...again in 2003 and 2004 only. 

In 2005, the standard deduction for married taxpayers will return to the EGTRRA schedule, starting at 174% of the single return standard deduction and gradually rising again to double the single return standard deduction amount amount by 2009.  The 15% tax bracket for married couples beginning in 2005 will fall to 180% of the 15% bracket for single taxpayers, as adjusted for inflation, and gradually increase again to 200% by 2008.

The AMT exemption amount is increased by $9,000 for married couples (from $48,000 to $59,000) and by $4,500 for single taxpayers (from $35,750 to $40,250), but only for the 2003 and 2004 tax years.

In lieu of depreciation, business taxpayers can immediately deduct under Section 179 up to $100,000 of qualified property placed in service for the year (up from $25,000).  In addition, the phase-out threshold for this special treatment is increased from $200,000 to $400,000.  These changes are effective for the 2003, 2004 and 2005 tax years, with both amounts indexed for inflation in 2004 and 2005.

The additional first-year bonus depreciation deduction is increased from 30% to 50% for property acquired and placed in service after May 5, 2003 and before January 1, 2005.  The bonus depreciation amount that may be taken with respect to automobiles increases from $4,600 to $7,650.

While there is no reduction in the tax rates paid by corporations, there is a small delay provided for a portion of an estimated tax payment.  For the corporate estimated tax payment due on September 15, 2003, 25% of that amount is not required to be paid until October 1, 2003.