| Lower tax rates for all, rebate checks for some |
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If you get one of these checks, be sure to hang onto
the stub. You'll need to refer to it when you do get around to doing
your taxes next year.
And the increased credit applies only to the 2003
and 2004 tax years. In 2005, the amount is scheduled to drop to
$700 per child and resume its incremental climb back to the $1,000
mark in 2010.
Love, honor,
lower taxes
About half of the married couples that file jointly find that
they pay more income taxes than their single counterparts. This
so-called marriage penalty is particularly troublesome for couples
where both spouses work.
Congress finally came up with a plan a few years ago
to ease the penalty. The only problem: The fix wouldn't start until
2005. The new law accelerates the relief.
Effective immediately, the standard deduction that
joint filers can claim would be twice that allowed single taxpayers.
And the amount of a couple's income that falls in the 15 percent
bracket would be double the income range of a single filer. In essence,
these changes tax a couple's joint income the same as if they each
were filing as single taxpayers.
This increased relief, however, is short-lived. It
is effective for 2003 and 2004 only. The law will revert to the
earlier version of phasing in the marriage-penalty relief over several
years unless Congress makes further changes in the next couple of
years.
Investment
enhancements
The centerpiece of the president's original tax bill was the
elimination of taxes on dividend income. He didn't get that, but
Congress did agree to ease the tax burden on dividends as well as
capital gains.
Currently, if you hold an asset for more than a year
any gain you make on the sale is taxed at a substantially lower
rate than your regular income. For most investors, those who are
in the top four tax brackets, this long-term rate is 20 percent.
Lower-income investors pay capital gains at 10 percent.
The new law lowers the long-term capital
gains rate to 15 percent for most taxpayers, 5 percent for those
in the lower tax brackets.
What about those dividends? For the most part, they
now will be taxed at the same 5 and 15 percent rates as long-term
capital gains.
The investment tax changes are effective for tax years
2003 through 2008. In 2008, the 5-percent rate drops to zero. On
Jan. 1, 2009, the previous capital gains rates are scheduled to
return.
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