and Growth Tax Relief Reconciliation Act of 2003
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The Jobs and Growth Tax Relief Reconciliation
Act of 2003 (JGTRRA) was passed by Congress on May 23, 2003 and signed
into law by President Bush on May 28, 2003. This tax package, the
third in three years, is being called the third largest in U.S. history.
In addition to providing individual and business tax relief, the legislation
follows in the footsteps of its predecessors by creating a series of retroactive,
temporary and phased-in/phased-out effective dates for various provisions,
and it overlaps with the Economic Growth Tax Relief Reconciliation Act
of 2001 (EGTRRA) and the Jobs Creation and Workers Assistance Act of 2002
here to review a summary of JGTRRA provisions.
Tax relief for individuals comes in the
form of accelerating previously-passed tax reductions, as well as introducing
several new tax provisions.
Tax Rates on Capital Gains and Dividends
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.
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.
in 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.
Tax Bracket Expansion
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.
in Child Tax Credit
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
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,
"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 relief for businesses includes the
|Increase in Small
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
|Increase in First-Year
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.