By ,
Published January 13, 2015
The good news is you'll probably have a lower tax bill this year. But filing may be more complicated than ever.
UNLESS YOU'RE A real wacko, chances are you're not terribly excited about filing your 2003 tax return. After all, if given a choice between wrangling with a hungry alligator or IRS tax forms, most folks would pick the former.
But this just might be a year when taxpayers should get a little bit pumped at the thought of tax filings. That's because, thanks to the 2003 tax cut, most folks will have the pleasant discovery that they either owe less than they did last year or that they'll be receiving a bigger refund. That's the good news. The bad news is that filing your taxes is going to be more complicated than ever. Here's some advice on how to make it through tax season unscathed.
The Basics
First, let me remind you that most of the individual rates were cut substantially last year. The old 27%, 30%, 35% and 38.6% rates dropped to 25%, 28%, 33% and 35%, respectively. Only the 10% and 15% rates were left unchanged.
Also, the standard deduction for folks who are married and file joint returns has been increased. So even if you've had to itemize in the past, you may be able to claim the simple and easy standard deduction for 2003. For 2003 returns, the joint-filer standard deduction was dramatically increased to $9,500 (up from only $7,850 for 2002). Plus, the 10% and 15% brackets for joint filers were widened to double the brackets for singles.
And if you file your returns using the married-filing-separate status, you also have some hearty tax relief coming your way. Your standard deduction for 2003 is $4,750 (up from only $3,925 for 2002). Plus, the 10% and 15% rate brackets are now the same as for singles. These are the first breaks folks in this long-oppressed tax-filing category have caught in many years.
Welcome to the Schedule D Fun House
So much for the easy part. Unfortunately, if you've got long-term investment gains or losses to report this year (meaning the investment was held for more than one year), filling out Schedule D is more complicated than ever before.
The 2003 version has a whopping 53 lines, and that doesn't even begin to count all the lines in the five worksheets included in the Schedule D instructions. (You don't have to actually file these worksheets with your return.) To top it all off, you must separately report all your gains and losses that occurred after May 5, 2003. (No wonder H&R Block's stock is up!) This ultracomplicated Schedule D drill is necessary because various categories of 2003 capital gains can be taxed at various rates. Believe it or not, all of the following rates can potentially apply: 5%, 8%, 10%, 15%, 20%, 25% and 28%. Needless to say, if you had lots of capital gains and losses in 2003, you might want to hire a professional tax preparer for that reason alone. Who could blame you?
Whether you hire a pro or do it yourself, please don't forget to claim any capital-loss carryovers from your pre-2003 years on the proper lines of your 2003 Schedule D. You can use these carryover losses to offset 2003 gains, which will lower your tax bill even further. Any excess losses can be used to offset up to $3,000 of your 2003 ordinary income from salary, bonus, interest, alimony, self-employment and the like. Claim the capital-loss deduction on Line 13a of Form 1040. (If you use married-filing-separate status, you can only offset up to $1,500 of your 2003 ordinary income with capital losses.) Any losses still remaining after the preceding steps get carried over to your 2004 tax year. (For more on the treatment of capital gains, click here.)
And don't forget: The tax rates on qualified dividends earned during 2003 were also cut by last year's law. They're now taxed at a maximum rate of only 15%. (Dividends that fall within the 10% or 15% brackets are taxed at only 5%.) This income also needs to be reported on dreaded Schedule D.
Deductible IRAs Now Available to More Folks
Are you covered by a qualified retirement plan (like a 401(k) or SEP) through your employer or your small business? If so, you have a much better chance of being able to make a deductible IRA contribution for the 2003 tax year than in years past. Why? Because for 2003 the income-based phase-out thresholds are $6,000 higher for both single and married taxpayers (who file joint returns). That means you may still be able to cut your 2003 tax bill substantially by making a 2003 deductible IRA contribution. (You have until April 15 of this year to make your deductible contribution.)
For the 2003 tax year, you can potentially contribute up to $3,000 to a deductible IRA, or $3,500 if you were 50 or older as of Dec. 31, 2003. If you're married, these contribution limits apply separately to both you and your spouse. Now for the fine print:
Keep in mind, if your MAGI is too high for a deductible IRA contribution, you may still be able to contribute to a Roth IRA. (In fact, for many folks, a Roth IRA is going to be the better option over the long haul, anyway. Click here to see which IRA is best for you.) The Roth phase-out ranges are between MAGI of $95,000 to $110,000 for unmarried taxpayers and $150,000 to $160,000 for married filers who file joint returns.
As always, for both deductible and Roth IRAs, you must have 2003 earned income from salary or self-employment at least equal to what you contribute for the 2003 tax year. Alimony payments received last year also count as earned income. If you file jointly, count both your income and your spouse's income.
Other Notable Changes for 2003
Preowned auto: $3,060
Preowned light truck or van: $3,360
New auto acquired before 5/6/03: $7,660
New auto acquired after 5/5/03: $10,710
New light truck or van acquired before 5/6/03: $7,960
New light truck or van acquired after 5/5/03: $11,010
Warning: The amounts listed above assume 100% business use in 2003. You must reduce these figures proportionately (based on mileage) if you had any personal use last year. If your business use was 50% or less, additional reductions are required.
https://www.foxnews.com/story/whats-new-for-your-2003-return