US Taxpayers Can Benefit From Lower Bills From June 16

by Mike Godfrey, Tax-News.com, Washington

13 June 2003

The Internal Revenue Service has revealed that certain taxpayers who estimate their tax payments can benefit from the lower tax rates and other changes from as early as next week when second quarterly payments are made.

Also, by recalculating their projected tax bills for 2003, many will be able to make lower payments for the rest of the year, explained the IRS in a statement.

For many, the biggest impact on quarterly payments will come from lower tax rates:

• The 10 percent rate applies to the first $7,000 of taxable income for single persons, $14,000 for married persons filing jointly and qualifying widow(er)s.
• The 15 percent rate for joint filers and qualifying widow(er)s covers up to $56,800 of taxable income.
• Rates above 15 percent are lowered to 25, 28, 33 and 35 percent.
• The maximum rate is 15 percent for qualified dividends for 2003 and for net capital gains on sales and installment sale payments received after May 5, 2003. But a five percent rate applies to gains or dividends that would have otherwise been taxed at a regular rate of 10 or 15 percent. (There are no changes in the special rates for unrecaptured section 1250 gain, collectibles gain, or section 1202 gain.)

In addition to the tax rates, other key changes include:

• A higher standard deduction for married persons: $9,500 for joint returns, $4,750 for a married person filing separately.
• A higher alternative minimum tax exemption amount: $40,250 for a single person or a head of household; $58,000 for married persons filing jointly or qualifying widow(er)s; and $29,000 for a married person filing separately.
• The limit on the section 179 deduction for business expenses rises to $100,000 and the deduction phaseout does not apply until qualifying expenses exceed $400,000. Off-the-shelf computer software now qualifies as section 179 property.
• The special first-year depreciation allowance rises from 30 to 50 percent for qualified property acquired after May 5, 2003. However, a taxpayer may choose to claim the 30 percent rate or even to not claim any special allowance. The depreciation limit for vehicles subject to this 50 percent allowance increases by $7,650.

The IRS explained that one significant break that people should generally not factor in when figuring estimated taxes is the increased Child Tax Credit (CTC) amount for 2003. Most parents who claimed that credit last year will get the increase later this summer in a check for up to $400 per qualifying child. The IRS will automatically determine the proper amount based on the 2002 return, said the revenue.

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