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The 2003 Tax Relief Act
Legal Tax Angles:
How to Save Taxes Without Going to Jail
Numerous links at the bottom of this page will take you
to a variety of articles and Internet information resources about the new tax
law. I welcome suggestions for links to other articles or reports about the new
law and its implications for individuals, investors and businesses.
Vern Jacobs
President Bush signed the 2003 tax law on Wednesday, May
29, 2003.
The name of the tax bill is the Jobs and Growth Tax Relief Reconciliation
Act of 2003 . The acronym is JGTRRA, but a lot of commentators will
probably refer to it as the "2003 tax cut" or the "2003 tax law".
In my humble opinion, this tax law will have the
most
impact on the economy, on businesses and investors than
any other tax law since 1986. For many taxpayers and their
tax advisors, it will require taking a fresh look at numerous tax
planning assumptions and starting with a clean slate.
I've written a 39 page report on the implications of the
2003 tax law for my subscribers, report customers and clients.
Because the new tax law is mostly about investment related tax issues, I'm
calling the report. "New
Tax Angles for Investors".
A digital (e-book) copy of my analysis of the 2003 tax law available for a
mere $9.00 -- if purchased through my automated on-line order system.
Additions to the report and updates will be distributed to subscribers to
The Jacobs Report, a FREE email service. To subscribe to The Jacobs
Report, link to
http://groups.yahoo.com/group/JacobsReport/ and then click on the button
that says, "Join this group".
First and foremost, the cuts are not permanent.
Like the estate tax cuts in 2001, they are being phased-in over a period of
years and some elements of the cuts will be repealed in 2009 unless the cuts
are extended before then.
There is no change in the complex phase-out of the estate and gift tax laws
that were included in the 2001 tax law. The 2001 law provided for the repeal of
the estate tax in 2010 with a phase-in of increased exemptions over a ten year
period. But that law also provided that if the repeal isn't made permanent
before 2010, it will be sunset in 2011 and the law will revert to what was
applicable in 2001. President Bush wanted to make the estate tax cuts
permanent, but the 2003 tax cut didn't include anything dealing with estate and
gift taxes.
Whether these changes and the ones enacted in the 2001 tax law will be extended
or made permanent depends on the make-up of the Congress and who is in the
White House in the next two or three elections. If the conservative element of
the Republican party continues to control both houses of Congress and the White
house from 2004 through 2008, then an extension of the tax cuts is very likely.
The cuts might even become "permanent". However, anything that can be done
during one administration can be undone by a future Congress or Administration.
If (perhaps when) a liberal Congress and/or President are elected, these tax
cuts can be quickly undone.
One of the biggest surprises for those of us who pay close attention to new tax
laws is the absence of a host of special interest provisions, technical
corrections and provisions to generate compensating revenue increases. The
final bill did not include proposed provisions designed to discourage
individual or corporate expatriation, to repeal the exclusion for foreign
earned income or to impose harsh new penalties on those who unintentionally
fail to file the annual Treasury Dept. Form TD F 90-22.1.
President Bush wanted to repeal the double tax on dividend income, but instead
the new law provides for a reduced tax rate, based on the rates used for long
term capital gains. However, while it wasn't part of the President's proposal,
the new law also includes a significant cut in the capital gains tax rate as
well. For most taxpayers, dividend income and long term capital gains (LTCG)
will be taxed at a maximum rate of 15% (down from 20% for LTCG) for most
taxpayers. For taxpayers in the 15% or lower brackets for ordinary (other)
income, the maximum rate on dividends and LTCG will be 5%. But as you might
expect, there are some exceptions and the dividend rate reduction will be
subject to an assortment of complicated rules to prevent "abuses" by creative
taxpayers. I deal with some of the nuances of the dividend rate cut in
my analysis of this new law.
The reduction in individual tax rates that were part of the 2001 tax law are
being phased in over a ten year period. The 2003 tax law speeds up the cuts
for all tax rate brackets over 15%. The top rate for 2003 will be 35% instead
of 38.6%. These rate cuts are retroactive to the first of the year. The top
rate on corporations is also 35% so this reduction makes the use of a taxable
corporation less appealing to owners of small businesses.
One of the biggest surprises in the 2003 tax law is the increase in the first
year deduction for business equipment (under tax code section 179) from $25,000
to $100,000. In addition, a special "bonus" depreciation rate of 30% of
depreciable property (in excess of the first year write off) has been increased
to 50%, for equipment purchased after May 5, 2003.
Other provisions of the 2003 tax law include an increase in the child tax
credit for 2003 and 2004, an increase in the standard deduction for married
couples and some modest relief from the alternative minimum tax for
individuals.
The analysis of the new tax is available to subscribers to my
online research
service at no additional charge.
I will also be incorporating these changes in the articles on this web site, in
the books that are sold by Offshore Press and for other publications.
Additional updates and commentary about the new tax law will be published in my
free email newsletter - the
Jacobs Report..
Meanwhile, here are some other Internet sources for further details on the new
tax law.
I will add additional links as I discover more specific information on
different elements of the new tax law. I welcome suggestions for on-line
articles that provide a unique insight into the new tax law and its impact on
different taxpayers. Please send your suggestions to jacobs -- @ --
offshorepress.com, but leave out the -- and spaces.
Vern Jacobs
October 28, 2003
P.S. Some of the links to current news stories are likely to be moved and may
not be available for more than a few days or weeks.
The following links were inserted in this web page on or before June 5, 2003.
Commerce
Clearing House Daily Tax News
An
Eight Page Summary (free) in PDF Format (by CCH)
Projected Tax Rates and Variables from 2002 through 2011 (two pages)
(This is not a tabulation of the new tax rate schedules.)
Various Press
Releases by the U.S. Treasury Dept.
Treasury Dept. Examples of Tax Relief by Taxpayer Group (7 pages)
House Ways & Means
Committee Link to Conference Report
Rules
Committee Index to the JGTRRA of 2003
PPCNet Summary of the 2003 Law
BNA
Tax Management Summary
Text of Senate Version of the Jobs and Growth Tax Relief Reconciliation Act of
2003 (which included extensive offsetting revenue raising provisions.)
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Caution:
While the information in this web site is believed to be from
reliable sources and is believed to be accurate, it is not intended to
represent legal, tax or financial advice for any reader of any part of
this web site. Due to frequent changes in the laws, new court cases
and differences of opinion among professional advisors, readers should
not rely on this information without the help of a qualified
professional advisor. |
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