Accelerate the Reduction in the 27% and Higher Tax Rates
The 2001 Tax Act included a series of rate reductions that are scheduled to take place over the period 2001-2006. Under the new law, the 2006 rates are effective for 2003. The following table shows the 2003 rates before the law change and the new 2003 rates.
| Prior 2003 rates |
27% |
30% |
35% |
38.6% |
| Reduced rates |
25% |
28% |
33% |
35% |
Who Benefits?
Taxpayers whose taxable income is large enough to be taxed at a rate higher than 15% benefit from this provision. For 2003, this applies to taxable incomes above the following amounts:
| Single |
$28,400 |
| Married Filing Jointly |
$56,800
(after expansion
of the 15% bracket) |
| Head of Household |
$38,050 |
| Married Filing Separately |
$28,400 |
For those who do benefit, the tax reduction can be substantial. The chart below shows the tax savings for various levels of taxable income, disregarding the shift in the 10% tax rate for Single and Joint filers and the shift in the 15% tax rate bracket for Joint filers.
Filing status
| Taxable income |
$15,000 |
$30,000 |
$50,000 |
$100,000 |
$250,000 |
$350,000 |
Single |
$0 |
$32 |
$432 |
$1,432 |
$4,432 |
$7,041 |
Head of Household |
$0 |
$0 |
$239 |
$1,239 |
$4,239 |
$6,848 |
Married Filing Jointly |
$0 |
$0 |
$306 |
$1,051 |
$4,051 |
$6,660 |
Taking the rate reduction and the shift in the 10% and 15% rate brackets, the benefit looks like this:
| Filing status |
Taxable income |
| $15,000 |
$30,000 |
$50,000 |
$100,000 |
$250,000 |
$350,000 |
| Single |
$50 |
$82 |
$482 |
$1,482 |
$4,482 |
$7,091 |
| Head of Household |
$0 |
$0 |
$239 |
$1,239 |
$4,239 |
$6,848 |
| Married Filing Jointly |
$100 |
$100 |
$406 |
$2,086 |
$5,086 |
$7,695 |
Our Advice
For most taxpayers, there's no need to do anything at all to make the most of this tax law change. If you receive a paycheck, your employer is required to implement new withholding tables by July 1, 2003.
If you are self-employed or make estimated tax payments throughout the year, you'll want to reexamine your estimated tax payments to be sure you're still paying enough, but not overpaying based on the new rates.
Return to Tax Law Changes
