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Here's the short version and summary of what the bill accomplishes for you at the following income levels.

Average Annual Savings From Tax Cut
Source: Associated Press
Publication date: 2003-05-22


Average annual savings that taxpayers with various levels of income can expect under new marginal income tax rates that would be applied retroactive to Jan. 1 under legislation cutting taxes $330 billion through 2013.

Here's some specfic areas of tax relief in a summary format. 
 

Example 1

On a joint return, with two children, and $125,000 of gross income we would estimate a $3,530 savings, including $1,000 in dividends and $2,000 in capital gains.

The law accelerates cuts in tax rates: Under the 2001 Tax Relief Act, taxpayers would have seen their rates fall over time. For example, the 28 percent bracket was to fall to 25 percent by 2006.

But under the compromise, instead of waiting until 2006 for the tax rates to fall, they drop immediately.

 So, in the example above, taxpayers in that bracket will see their rate fall to 25 percent this year. The same timing applies for all other brackets. The wealthiest taxpayers -- currently at 38.6 percent -- will see their rate fall to 35 percent. Those in the 30 percent bracket will see their rate fall to 28 percent.

After Bush signs the tax cut into law, your employer should adjust your paycheck automatically so less tax will be withheld. Our clients should contact us at Tax Planning for a projection of your estimated savings.

No taxpayer left behind !

There is something for everyone in this bill and almost all of it means less tax. Take a look at the following bullet points.

--Expands the lowest tax bracket: Currently, the first $6,000 of taxable income for single filers falls into the lowest tax bracket, 10 percent. Under the new plan, that ceiling is boosted to $7,000. For married filers, the maximum current taxable income for this bracket is $12,000. That will change to $14,000. This means a tax cut of $50 per year per person.

--Gives more money per child: The $600 child tax credit leaps to a maximum of $1,000 per child for this year and next. This is the one section of the law under which families will get money back soon after the law is enacted. If you filed your 2002 return and claimed the $600 credit for a child, you will get a $400 check mailed to you by October this year. Geideman calls this an "advance" on the credit for next year, similar to those "refunds" people received when the 2001 tax act passed. (Remember, the credit phases out at low and high income levels, so not everyone will receive the full $400.).

--Eliminates that old marriage penalty: The days will soon be over when you could argue that, come tax time, it is cheaper to be single. The new plan accomplishes this by changing the standard deduction and the 15 percent tax bracket.

--If you are married and don't itemize, your standard deduction essentially will be the same per person as if you were single. For example: Currently, single filers who don't itemize claim a standard deduction of $4,700.

--Married filers not itemizing claim a standard deduction of $7,850 -- in other words, just $3,925 per person. The new plan makes the married couple's deduction $9,400, double the deduction for the single filer. This second change would apply to all married filers. It essentially puts married couples on the same playing field as single filers when it comes to the 15 percent tax bracket. Presently, single filers pay 15 percent tax on income over $13,700 and under $35,650.

--Married couples pay 15 percent per person on income from $12,925 to $30,275. Above that, the rate rises -- which means that married couples start paying the higher rate at a lower income level than singles do. The new plan eliminates that discrepancy. Married couples will pay 15 percent tax on income up to $35,650 per person.

--This change was planned for 2008, but now it will become effective this year.

This is just the tip of the benefits ! No taxpayer (or investor) is left behind.

We have a more detailed analysis of the effects on investment income and homeowners !