TAX YEAR 2003 - TAX CHANGESThere are many advantageous tax changes for the 2003 tax year as a result of the Jobs and Growth Tax Relief Reconciliation Act of 2003, signed into law May 28, 2003. We ready, willing, and able to help you determine which ones will affect your own tax return. The most significant benefits you'll notice are: (for individuals)
(for businesses)
TAX YEAR 2003 - DIFFERENCES BETWEEN STATE OF CALIFORNIA AND FEDERAL TAX LAWCalifornia does not tax:
California law differs from federal law regarding certain itemized deductions. California does not have the earned income credit. California does not allow some of the federal adjustments to gross income. California allows contributions to many different funds. California has many tax credits of its own, a few of which are:
TAX YEAR 2003 - TAX TIPSTAX TIPS FOR ALL TAXPAYERS Education related: Hope Scholarship Credit up to $1500 maximum available per student, per year for first two years of qualified post-secondary tuition and fees (not books or room and board); can be taken by Lifetime Learning Credit up to $2000 maximum for post-secondary expenses not eligible under the Hope Scholarship Credit, with an unlimited number of years, and available for undergraduate, graduate, professional degree as well as other students acquiring or improving job skills Tuition and Fees Deduction for higher education expenses, even if classes help you qualify for a new job; subject to AGI limitations Student Loan Interest up to $2,500 on qualified education loans for college or vocational school costs, subject to AGI limitations Retirement related: Roth IRA nondeductible contributions up to $3,000 can be made; distributions including earnings are tax-free when certain requirements are met; contribution limit subject to AGI limitations IRA deduction up to $3,000 is available to taxpayers not covered by an employer-sponsored retirement plan; some who are covered by employer-sponsored are also eligible for full or partial deduction, subject to AGI limitations A spousal IRA deduction is available for a nonworking spouse, up to certain contribution limits Early withdrawals from an IRA subject to a 10% penalty (in addition to regular income tax) have some penalty exceptions, such as medical expenses, qualified educational expenses, first-time home purchase up to $10,000, medical insurance for individuals unemployed for at least 12 weeks Other Tips: You should keep your receipts and documents to support your tax returns for at least four years If you sell your principal residence in which you've lived for two years of the five-year period ending on the date of the sale, you are entitled to a tax-free capital gain exclusion up to $250,000 ($500,000 if married filing jointly); any improvement costs you've had may help reduce your capital gain on the residence, and those records should be kept for four years after it is sold Certain Series EE savings bonds issued after 1989 are tax exempt if the procceds are used for qualified educational expenses of the taxpayer, spouse or dependent Stock or mutual funds dividends reinvested may help increase your cost basis later when at the time of sale, which may reduce your gain or increase your loss; maintain good records of those reinvestments If you have "allocated tips" on your W-2 form, that amount is subject to both Social Security and income tax unless you can show that you've kept a log of your tips with a lesser amount received TIPS FOR TAXPAYERS WHO ITEMIZE THEIR DEDUCTIONS Life insurance, disability, and and loss of income insurance are not deductible; only insurance premium for policies that cover medical costs Qualified long-term care insurance premiums deductible subject to age and dollar limits: age 40 and under, $250; ages 41-50, $470; ages 51-60 $940; ages 61-70, $2510; ages 71 and over, $3130 Property special assessments are normally not allowed as a current deduction in addition to the real estate tax deduction, but the interest part of the special assessment is deductible Points, or loan origination fees, are deductible as interest by the buyer of a new principal residence if certain IRS rules are met; also seller-paid points can be deductible by homebuyers Points paid on refinancing an existing residence must be deducted over the life of the new mortgage Charitable donations of $250 or more to any one organization must have written substantiation from the organization; a cancelled check is not sufficient When you make non-cash charitable donations, ask for a receipt from the organization and attach a record of the items donated to the receipt as proof for the deduction If you own stocks or bonds you can take a charitable deduction for gifting these assets to churches or other non-profit organizations Appraisal fees to determine the value of a charitable donation or a casualty loss are deductible, subject to certain rules If you suffer a casualty loss from flood, fire, theft, etc., which exceeds 10% of your AGI, you may be able to claim a tax deduction for that loss Expenses you incur to find a new job in the same field of employment may be deductible, subject to AGI limitations Legal fees you incur for divorce or estate planning may be deductible to the extent that those fees involve protecting or arranging your investments Tax return preparation fees are deductible Expenses you incur to attend seminars or meetings or conventions which give investment advice to taxpayers are not deductible Interest paid on a boat or recreational vehicle loan may be deductible as home mortgage interest if it has basic living accommodations such as sleeping, toilet, and cooking facilities |