Some Of The Tax Cuts Many Details

June 2, 2003
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Culver, Wood & Culver CPAs provided the following snapshot of the new tax law.

The measure immediately reduces marginal tax brackets paid by all but the lowest earners. Singles whose adjusted gross income exceeds $28,400, and married couples who file jointly with an AGI of at least $47,450, will get a break.

Details:

  • Singles and married couples whose AGI tops $311,950 now pay tax rates up to 38.6 percent. That rate falls to 35 percent.

  • Those who currently fall under the 35 percent bracket (single filers with incomes over $143,500 and joint filers with incomes over $174,700) will have their tax rate trimmed to 33 percent.

  • Taxpayers in the 30 percent bracket will have their rate reduced to 28 percent. (That's singles with an AGI of $68,800 to $143,500 and married couples with an AGI of $114,650 to $174,700.)

  • Those in the 27 percent bracket will pay no more than 25 percent. This applies to singles with incomes from $28,400 to $68,800 and married couples filing joint returns with an AGI between $47,450 and $114,650.

  • Currently, investors who owe dividend taxes must pay their marginal tax rates, or as much as 38.6 percent. The tax package freezes that tax at 15 percent for anyone in the top four tax brackets, and sets it at 5 percent for people in the 10 percent and 15 percent brackets.

  • The long-term capital gains tax rate falls to 15 percent from 20 percent. For investors in the 10 percent and 15 percent brackets, the tax drops to 5 percent. The new cuts would apply to investment transactions made on or after May 6 and only to investments owned for a year or more. Short-term capital gains rates still are taxed at regular income rates.

  • The tax package immediately boosts the child tax credit to $1,000 from $600, meaning some 24.4 million families will get a $400 rebate check this summer. The credit will not be available to singles with an AGI over $75,000 and married couples with an AGI exceeding $110,000.

  • Married couples filing jointly will be able to earn up to $56,800 and remain in the 15 percent bracket. That’s twice what singles can currently earn and remain in this bracket. Currently, married couples whose AGI tops $47,450 cannot remain in the 15 percent range — the marriage penalty.

The standard deduction also is raised for married couples to $9,500, double the $4,750 for singles, eliminating the other aspect of the marriage penalty.

  • The measure also increases the amount that small businesses can expense from $25,000 to $100,000.

This provision would change the definition of small business from $200,000 of capital purchases to $400,000. Both the expensing and definition levels would be indexed to inflation.           

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