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The child tax credit increases from $600 to
$1,000 for 2003 and 2004. Checks in amounts of up to $400 per eligible
child will be paid in advance
to taxpayers this summer based on their
2002 Form 1040. In 2005, the child tax credit is scheduled to be reduced
to $700, but will increase back to $1,000 by 2010.
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The 10% tax bracket is expanded for 2003 and 2004
and will apply to the first $7,000 of taxable income (up from $6,000) for single
taxpayers and the first $14,000 of taxable income (up from $12,000) for married
taxpayers. These changes were scheduled to begin in 2008 under the
Economic Growth and Tax Relief Reconciliation Act of 2001.
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The tax rates above 15% are reduced to 25%,
28%, 33% and 35% (from the current rates of 27%, 30%, 35% and 38.6%).
These reductions were scheduled to be in effect in 2006 under the Economic
Growth and Tax Relief Reconciliation Act of 2001.
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Marriage Penalty Relief
The standard deduction for married couples is twice the amount of the standard
deduction for single taxpayers for 2003 and 2004. The 2005, the standard
deduction for married taxpayers will fall to 180% of the standard deduction
for single taxpayers and then gradually increase to double the amount by 2009.
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Increased AMT Exemption |
The AMT exemption amount is increased to
$40,250 (from $33,750) for single taxpayers and to $58,000 (from $45,000) for
married taxpayers for 2003 and 2004.
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Dividends and capital gains will be
taxed at a maximum rate of 15% through 2008. For taxpayers in the 10% and
15% tax brackets, the rate will be 5% through 2007 and 0% for 2008. The
capital gains rate reduction applied to sales made and payments received after
May 5, 2003 and through December 31, 2007. These lower rates apply for
both regular tax and AMT. On January 1, 2009, the old rates of 20% and 10%
return.
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Small businesses can expense up to $100,000
(increased from $25,000) of the cost of qualifying Section 179 property through
2005. This limit is reduced dollar for dollar for the amount by which the
cost of all qualifying property exceed $400,000. Therefore, no Section 179
expense is allowed when total qualifying Section 179 property meets or exceeds
$500,000.
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The bonus depreciation rate established by the
Job Creation and Worker Assistance Act of 2002 increased to 50% (from 30%) and
has been extended to December 31, 2004. This increased rate applies to
qualifying property placed in service after May 5, 2003.
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In
accordance with IRS Circular 230,
Regulations Governing the Practice of Attorneys, Certified Public Accountants,
Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue
Service, the information on this website is for general information
purposes only and is not intended or written to be used as, and cannot be used
as or considered to be a “covered opinion” or other written tax advice, and
should not be relied on for the purpose of (1) avoiding tax-related penalties
under the Internal Revenue Code or (2) promoting, marketing or recommending to
another party any transaction or tax-related matter(s) addressed herein, for IRS
audit, tax dispute or other purposes.
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