Highlights of Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)

The recently passed JGTRRA lowered various tax rates and increased tax deductions on the newly purchased technology, machinery and equipment for business.

Sell your investments (stock, house, etc.) and pay only 15% taxes

Under JGTRRA, the tax rate on long-term capital gains (held more than a year) for most taxpayers dropped to 15%, which started from May 5, 2003 and lasts until January 1, 2009.  A small business owner who is thinking about retirement thus may want to consider selling his or her business during this period to take advantage of the lower rate.  A taxpayer who wants to sell an appreciated property and buy another property for investment should do so during this period.

Invest in dividend paying stocks and pay only 15% taxes

JGTRRA also reduced the tax rate on dividends to 15%.  Investors may want to change their asset allocations to give more weight to dividend paying stocks.  In addition, for a planning tip for closely held corporations suggests they should consider their pay packages to include more dividends instead of salary or bonus.  The salary or bonus usually carries the higher income tax rates.

Buy more fixed assets and you get more tax deductions

If you buy business property (machinery, equipment, etc.), you can deduct up to $100,000 in the years 2003, 2004 and 2005 (IRS section 179 deduction).  For these years, JGTRRA expands the definition of business property to include off-the-shelf computer software.

In addition to the above 179 deduction, a bonus depreciation is allowed

JGTRRA allows a bonus depreciation deduction up to 50% on business property, in excess of the section 179 property, the taxpayer places in service after May 5, 2003 and before January 1, 2005.  Taxpayers who plan to acquire or construct a new building may want to take advantage of this additional depreciation by identifying components that qualify for the bonus depreciation.

Home Page | Top