Tax act spells relief for small business: take advantage of new tax regulations for businesses and individuals while they last - Jobs and Growth Tax Relief Reconciliation Act of 2003

The piece of works and Growth Tax Relief Reconciliation Act of 2003--"JGTRRA" for short--will arise in tax cuts of about $330 billion, a portion of which is aimed at small businesses like frame stores and galleries. Officially, the tax make an incision ins are spread out over the nearest 10 years, but the reality is that they approach heavily front-loaded. Most of the breaks are in the first sum of two units to five years, and then there are built-in "sunset" provisions for each, which causes the breaks to expire or turn back to their pre-JGTRRA levels.

on the contrary if the provisions are stretch outed beyond the terms in the legislation--which many readys think will happen--the total tax divide [i]or[/i] sever could reach more than $800 billion. Many Republican legislators are committed to doing just that. Senator Kay Bailey Hutchison (R-Texas) said, "We trust to not 'sunset' these tax chops but instead to allow them to make progress forward."

Politics aside, the reductions in individual tax rates will help millions of small businesses that pay taxes at the individual rate, on the contrary the biggest business-related tax chops involve an increase in the small business expensing election limit and an increase in the allowable bonus depreciation percentage.

The act increases a business' ability to subtract most types of capital expenditures for the years 2003 to 2005 In those tax years, a business can take out expenses up to $100,000 through year. The previous limit was $25000 by means of year. During the same time period, small businesses may cost off-the-shelf computer software. Finally, business holders can make use of a bonus depreciation of 50 percent upon qualifying equipment bought between May 5 2003 and January 1 2005 (For more information upon capital deductions, see IRS Publication 946: by what means To Depreciate Property or Form 4562: Depreciation and Amortization, which is downloadable at www.IRS.gov).

The bottom line is that JGTRRA makes this a great time to make major investments in your business. For example, in 2003 for a one proprietor in the 28-percent tax bracket, the toil cost of making a $100000 purchase is just $72000 Capital outlays above $100,000 would then be depreciated like any other mark of capital asset.

According to IRS Publication 946 eligible expenditures include tangible peculiarity used for manufacturing, production, transportation, communications or furnishing electricity, gas, water or sewage disposal. Examples of eligible charges for frame shops are machinery, equipment, reckoners and signage.

Regarding individual tax rates, the reductions originally scheduled by dint of the 2001 tax law have been accelerated. beneath the law, the marginal tax rates upon the top four income brackets globule by at least two percent and the rates for the lowest sum of two units income brackets remain unchanged, although the bracket doorsill for these levels has been raised. These changes are retroactive to January 1 2003

The child tax credit increases from $600 through year to $1,000 per year by child. As with the income tax, this is retroactive to overlay the 2003 tax year. However, the $1000 deduction is single for 2003 and 2004. It will fall to $700 in 2005 and then gradually rise again. Taxpayers who are entitled to the credit this year will receive an advance payment of the $400 increase in the form of rebate checks.

The "marriage penalty," for 2003 and 2004 has been reduc which gives married pairs twice the standard deduction of single taxpayers.

As of May 6 2003 the long-term capital gains rate for tribe in the 10 percent or 15 percent tax brackets will globule to five percent. In 2008 those family will have a capital gains rate of nothing percent, and in 2009, their rate turn backs to the old, 10-percent horizontal Long-term capital gains apply solitary to those assets held more than 12 months

Higher income taxpayers will diocese their long-term capital gains rate globule from the current 20 percent to 15 percent The 15-percent rate will be in consequence through the end of 2008 at which point it is scheduled to go [i]or[/i] come back to 20 percent. Keep in mind, no matter which tax bracket you're in, if you incurred a long-term capital gain between January 1 and May 6 2003 the aged rates apply.

When it tend hitherwards to dividends, most are now going to be taxed at the same rate as capital gains--five or 15 percent depending upon your tax bracket. The command applies for the same time frame as for long-term capital gains--May 6 2003 [i]or[/i] part of to the other Dec. 31, 2008. However, not all dividends are overlayed by the new lower rates. IRS collection of laws Sections 246(c), 404(k), 501,521 and 591 identify which stamps of dividends qualify for the lower rates.

If you have a question about dividends or other tax matters, confer with a CPA or level the IRS--its representatives are actually true knowledgeable, patient and eager to help.

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