• Standard Deduction
• Marriage Penalty
• Kiddie Tax
• Child Tax Credit
• Child and Dependent Care Credit
• Health Insurance Premium Deduction
• Lower Capital Gain Tax Rate
• Reduced Taxation on Dividends
• Foreign Earned Income Exclusion
• Standard Mileage Rate
• 2003 Maximum Retirement Plan Contributions
• Small Business Provisions

2003 Tax Act

Standard Deduction ( Projected )

Marriage Penalty

In 2003 and 2004, the marriage penalty will be eliminated for many married taxpayers by adjusting their standard deduction and the 15% tax bracket to twice the amount for single taxprayers to $9,500. From 2005-2008, the standard deduction and the 15% tax bracket for married couples will be based on the same applicable percentages that are scheduled to go into effect under the 2001 Act, which appears to gradually raise the amounts to double the single rates by 2008.

Kiddie Tax

For 2003, the amount used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax", is $750. (This amount is the same as the $750 standard deduction amount.

Income greater than $1,500. Taxed at parent's highest bracket until the child reaches age 14.

Child Tax Credit

For 2003 and 2004, the maximum credit you can claim is $1,000 for each qualifying child under age 17. The credit is phased out beginning at modified AGI levels of $110,000 - MFJ ($75,000 - HOH, $55,000- MFS).

The qualifications for claiming the additional child tax credit have been expanded to include taxpayers with 1 or more qualifying children when the taxpayer is not able to claim the full child tax credit for each child.

Child and Dependent Care Credit

Beginning in 2003, the maximum amount of eligible day care expenses paid for dependent(s) under age 13 of working couples will increase from $2,400 to $3,000, if there is one qualifying child (from $4,800 to $6,000, if there are 2 or more) and increases the maximum credit from 30% to 35%. The phase-down of the credit begins as income rises to a maximum credit percentage of 20% after income exceeds $43,000.

Health Insurance Premium Deduction

The deduction for health insurance premiums and qualified LTC insurance for the self-employed from your trade and business income has been accelerated to 70% for 2002 and 100% for 2003 on.

Lower Capital Gain Tax Rate

Capital gains rates fall from 20% to 15% for higher income earners for qualifying property sold between May 6, 2003 through December 31, 2007.

For lower income taxpayers, the current 10% rate falls to 5%. In 2008, ther will be a zero percent capital gains for lower income taxpayers. Then, on January 1, 2009, the sunset provisions spring to life (maybe) and capital gains taxes will increase to prior levels.

The big diference between the highest tax rate of 35% and the highest captial gains rate of 15% makes tax planning even more important. The five-holding period created by EGTRRA is effectively repealed.