While San Diego residents live in San Diego County in California, both State and Federal Taxes are collected. The Franchise Tax Board is the taxing agency for San Diego in California and the Internal Revenue Service is the taxing agency for San Diego for the United States. Our law firm of Law Office of Scott C. Soady, A Professional Corporation, LLP are not Certified Public Accountants and do not prepare tax returns for clients. We can, however, discuss estate planning strategies. Please feel free to e mail or call us for a complimentary consultation.
On May 28, 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 became law. Much of this federal tax law applies only to the years 2003 and 2004, after which provisions in the 2001 Tax Act will again become effective. Nonetheless, the Act contains some significant changes for individuals as well as businesses.
The child tax credit increases from $600 to $1,000, which is an acceleration of a scheduled phase-in that was to have occurred between 2005 and 2010. In 2005, the credit will fall to $700, but will then gradually rise to $1,000 again by 2010 by virtue of the 2001 Act.
The standard deduction for married couples will double to twice the amount of the standard deduction for single taxpayers. Married taxpayers filing a separate return will claim the same standard deduction as a single person. Similarly, for 2003 and 2004, the upper limit of the 15% income tax bracket for married couples will increase to a dollar amount that is twice that for a single taxpayer.
For 2003, income levels for the 10% tax bracket will increase to $7,000 for single taxpayers and $14,000 for joint filers. In 2004, these levels of income will be indexed for inflation. Retroactive to January 1, 2003, the new tax rates for individuals are 10%, 15%, 25%, 28%, 33%, and 35%. For transactions taking place from May 6, 2003 to December 31, 2007, the maximum capital gain tax rate has dropped from 20% to 15%, and from 10% to 5% for lower-income taxpayers.
To reduce the double taxation of corporate earnings, dividends received by an individual shareholder from a domestic or qualified foreign corporation will be taxed like capital gain income. This means a rate of 15% for most taxpayers and 5% for those at lower-income levels, assuming the stock is held for at least the holding period set by law. Dividends from certain corporations are not eligible for this new treatment, such as those from tax-exempt charities, farmers’ cooperatives, and particular foreign companies
The Act increases the amount of investment that may be deducted immediately by small businesses from $25,000 to $100,000. The amount of this deduction is reduced by the amount that the cost of the business assets exceeds $400,000. Under prior law, this phase-out of the deduction began at $200,000.
The additional first-year bonus depreciation deduction is increased from 30% to 50% for investments acquired and put into service between May 5, 2003 and January 1, 2005. Qualifying property still must be brand new, with a class life of 20 years or less.