• The 2003 Tax Rate Schedules  have been revised to reflect the following changes.

1.       The tax rate brackets of 27%, 30%, 35%, and 38.6%, have been reduced to 25%, 28%, 33%, and 35%, respectively.

2.       The 15% rate bracket for married taxpayers filing jointly and qualifying widow(er)s has expanded to twice that of single filers.

3.       The maximum taxable income subject to the 10% tax rate has increased to $7,000 for single taxpayers and married taxpayers filing separately ($14,000 for married taxpayers filing jointly and qualifying widow(er)s).

• The basic standard deduction for married taxpayers filing jointly and qualifying widow(er)s has increased to $9,500 (twice that of single filers). The standard deduction for married taxpayers filing separately has increased to $4,750 (the same as that of single taxpayers).

• The maximum child tax credit has increased from $600 to $1,000 per child. Beginning on July 25, 2003, checks will be mailed to taxpayers who claimed the child tax credit for 2002. The checks are an advance payment of the increased portion of the child tax credit for 2003, up to a maximum of $400 per child, and will be based on 2002 tax return information using the number of qualifying children under age 17 as of December 31, 2003. No action is required by any taxpayer to receive an advance payment check. The checks will be mailed to qualifying taxpayers on the dates shown in the Mailing Schedule for Advance Child Tax Credit Payments . The advance payment reduces the amount of the child tax credit allowed for 2003. Any advance payment that is more than the child tax credit for 2003 does not have to be paid back.

• The alternative minimum tax exemption amount has increased to $40,250 for single taxpayers and taxpayers filing as head of household; $58,000 for married taxpayers filing jointly and qualifying widow(er)s; and $29,000 for married taxpayers filing separately.

• The maximum tax rate on net capital gain (i.e., net long-term capital gain reduced by any net short-term capital loss) has been reduced from 20% to 15% (and from 10% to 5% for taxpayers in the 10% and 15% tax rate brackets) for property sold or otherwise disposed of after May 5, 2003 (and installment sale payments received after that date). The reduced rate applies for both the regular tax and the alternative minimum tax. The higher rates that apply to unrecaptured section 1250 gain, collectibles gain, and section 1202 gain have not changed.

• The same 15% (or 5%) maximum tax rate that applies to net capital gain also applies to dividends paid by most domestic and foreign corporations after December 31, 2002. Certain dividends from regulated investment companies (such as mutual funds), real estate investment trusts, and certain foreign corporations do not qualify for the reduced rates.  The 2003 Form 1099-DIV and 2003 Instructions for Form 1099-DIV will be reissued in June 2003 to add a box for the reporting of qualified dividends subject to the reduced rates.

Public Law 108-27, The Jobs and Growth Tax Relief Reconciliation Act of 2003, was signed by President Bush on May 28, 2003.  Described below are the major changes made by the new law that affect tax years beginning in 2003.  Be sure to take these changes into account when figuring any future estimated tax payments due for 2003.

All Businesses, Including Self-Employed

• The special first-year depreciation allowance has been increased from 30% to 50% for qualified property acquired after May 5, 2003 (except for property acquired under a binding written contract in effect before May 6, 2003).  Instead of claiming the 50% allowance, taxpayers may elect to claim the 30% allowance or elect not to claim any special allowance.  The depreciation limit for vehicles subject to the 50% allowance is increased by $7,650.  The 2002 Instructions for Form 4562 will be reissued in June 2003 for use by fiscal year 2002-2003 filers to reflect the increase in the special allowance.
  

• The limit on the section 179 expense deduction is increased to $100,000 for qualified property ($135,000 for qualified zone property, qualified renewal property, or qualified New York Liberty Zone property).  This limit is reduced by the amount by which the cost of section 179 property placed in service during the year exceeds $400,000.  Also, the definition of section 179 property has been expanded to include off-the-shelf computer software.

Corporations

• The installment due date for 25% of any corporate estimated tax payment otherwise due in September 2003 has been changed to October 1, 2003.  The due date for the remaining 75% of the September 2003 estimated tax payment has not changed.

Mailing Schedule for Advance Child Tax Credit Payments

The Treasury Department will begin mailing checks for the advance payment of the increased Child Tax Credit on July 25, with most checks mailed by August 8. These will cover eligible taxpayers who filed their 2002 tax returns by April 15. As the IRS processes returns from taxpayers who filed after that date, it will schedule advance payments on a weekly basis. No checks will be sent after December.

For the first three weeks, the checks will be sent according to the last two digits of the taxpayer's social security number:

• 00-33 -- mailed July 25
• 34-66 -- mailed August 1
• 67-99 -- mailed August 8

Eligible taxpayers whose returns were not processed in time for these initial mailing dates will have their checks sent out after the IRS processes their returns

Revised 2003 Tax Rate Schedules