If panic is beginning to set in because there are only 59 days left to mail in your 2003 tax return and you can't understand the forms, relax. Frank Aquilino of Accounting, Law and Taxation can help. Here he explains important tax changes for 2003. And in this Q&A you have the opportunity to ask the questions. Send us your tax questions and Aquilino will answer as many as possible in the next issue of INSIGHT Online. Send your question to valladaresw@mail.montclair.edu, and put "Tax Question" in the subject line. The name of the person submitting the question will not be published.

Aquilino explained that a new tax bill has been introduced in each of the last three years. The most recent, "The Jobs and Growth Tax Relief Reconciliation Act of 2003," made a number of changes in the tax law. "Almost all the changes were designed to reduce individual taxes, though the reductions will not benefit all taxpayers equally," he said. Following is a summary of these changes for 2003.

Tax Rate Changes Retroactive to Jan. 1, 2003
10-percent rate is expanded to cover more taxpayers.
15-percent rate for married filing joint and qualifying widowers is expanded.
Remaining rates changed as follows: 27 to 25 percent, 30 to 28 percent, 35 to 33 percent, 38.64 to 35 percent.

New Capital Gains Rates
For long-term capital gains made after May 5, 2003, the 10-percent rate for low-income taxpayers drops to 5 percent, and the 20-percent rate drops to 15 percent.

Child Tax Credit Increased
For children under 17 years old, this credit has been increased from $600 to $1,000. Taxpayers who have already qualified for this credit in 2002 received a $400 check for each child and must add it back on their 2003 return as income.

Dividend Income Taxed at Lower Rates
Dividend income received from a domestic or qualified foreign corporation will be taxed at a 15-percent tax rate for most taxpayers. Lower income individuals will be taxed at 5 percent.

Married Filing Joint Standard Deduction Increase
The standard deduction for this filing status is double the single filing status. This is an increase from $7,950 to $9,500.

Marriage Penalty Relief
The new law provides relief for the marriage penalty that results from how the 15-percent tax bracket was applied to two married individuals compared to two unmarried individuals. Two unmarried individuals could have a greater amount of income taxed at the lower 15-percent rate than a married couple with the same income. The new law expands the 15-percent rate for married couples to twice the width of the 15-percent rate for single filers.

Lifetime Learning Credit Increased
The maximum credit you can take increased from $1,000 to $2,000.

Increase in IRA Contributions
Both traditional and Roth IRA contribution limits have been increased from $2,000 to $3,000.
If you have a traditional IRA and are covered by a retirement plan at work, the amount of the phaseout to take the deduction has increased.

So if you have a question relating to these or other tax topics, send them to valladaresw@mail.montclair.edu. Remember to put "Tax Question" in the subject line.

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