The new federal tax law signed on May 28, 2003, implements several new individual income tax breaks.
According to the Legal Alert, published by tax and business attorneys at Lindquist & Vennum, most individual income will be taxed at lower rates. For example:
If you file as a single person or are a married person filing separately, the first $7,000 (instead of $6,000) of your taxable income will be taxed at 10 percent, the lowest rate.
If you file a joint return, the first $14,000 (instead of $12,000) of your taxable income will be taxed at 10 percent.
If you file a join return, more of your taxable income will be taxed at 15 percent (instead of the highest bracket of 25 percent.)
Rates exceeding 15 percent for all individuals are reduced as follows: 25 percent (instead of 27 percent); 28 percent (instead of 30 percent); 33 percent (instead of 35 percent); and 35 percent, the top rate (instead of 38.6 percent.)
These rates were effective retroactively on Jan. 1, 2003. The IRS asked employers to implement the new withholding tables by July 31, 2003.
But these rates won’t last forever. For example, adjustments to the 10 percent rate are only effective in 2003 and 2004. After 2010, the rates exceeding 15 percent will sunset and revert to the pre-2001 rates of 28 percent, 31 percent, 36 percent and 39.6 percent.