Sol Schwartz & Associates

May 2003

Tax cuts now, but future uncertain

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), touted as the third largest tax cut in history, provides significant tax relief for nearly all individuals.

In addition to everything else it does, the 2003 tax act also creates an atmosphere of uncertainty.

As explained in detail in this newsletter, many of the provisions of the new tax law will expire in a few years unless further action is taken.

So you can expect even more tax changes.

Signed into law on May 28, 2003, JGTRRA provides approximately $330 billion of tax relief over the next 10 years. It also provides $20 billion in aid to the states.

Unlike past legislation in which taxpayers had to wait years for the anticipated tax relief (referred to as "back-loading"), this law will provide more than 80 percent of the tax savings over the next three years.

Many of the provisions of this new law are effective retroactive to Jan. 1, 2003, and individuals may see evidence of these changes in the next few months. Some people will receive rebate checks from the U.S. Treasury Department beginning in July, and wage earners will see an increase in their take-home pay starting this summer.

In hopes of jump-starting the economy, the JGTRRA offers a number of provisions, including the following:

Reduces the tax rate for capital gains
Accelerates the increase in tax-rate reductions
Accelerates the increase in both the standard deduction for married couples and the child tax credit
Provides alternative minimum tax (AMT) relief to individuals
Increases bonus depreciation and Section 179 expensing for small businesses

This new law creates numerous opportunities, as well as tax questions. In this special edition of Federal Tax Watch, we provide an overview of the significant changes. Our firm has carefully studied the new provisions and can explain them in detail. Contact our professionals today to discuss how you may benefit from this new law.

SPECIAL FEDERAL TAX WATCH INDEX
INTRODUCTION * Tax cuts now, but future uncertain INDIVIDUAL INCENTIVES AMT Exemptions * AMT exemptions will help, but more is needed * Expansion of brackets giveth, AMT taketh away Child Tax Credit * Do you have kids? The check’s on its way Individual Tax Rates * Change in tax rates means lower taxes for some * 10 percent tax bracket ... Now you see it; now you don't Marriage Penalty * Joint filers: The penalty for being married will briefly be commuted ... maybe	BUSINESS INCENTIVES Bonus Depreciation & Section 179 Expensing * Businesses benefit from changes to Section 179 and depreciation allowance Sunset Provisions * And the sun also sets ... INVESTOR INCENTIVES Capital Gains Tax Reduction * Capital gains, dividend income taxes reduced * Warning: All gains are not created equal Dividend Tax Reduction * Capital gains, dividend income taxes reduced OTHER * New law leaves out key issues * To Our Clients ...

The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.