Sample Client Letter
[Date] [First Name] [Last Name] [Business] [Address] [City] [State], [Zip] Dear [First Name], As you may know, the President recently signed a new tax law. Known as the Jobs and Growth Tax Relief Reconciliation Act of 2003, the Act provides significant tax cuts to individuals, families, investors and businesses, generally retroactive to the beginning of 2003. Here is a quick rundown of the new law’s key provisions. For individuals: The new law widens the bottom 10% tax bracket. Because of the graduated tax rate system, this helps most taxpayers from bottom to top—more of your income will be taxed at the low 10% rate. In addition, the new law reduces tax rates above the 15% bracket. Under the old rules, the tax brackets for middle- and upper-income taxpayers were 27%, 30%, 35% and 38.6%; the new rates are 25%, 28%, 33% and 35% respectively. For families: Under the old rules, families could claim a $600 tax credit for each dependent child under age 17. The new law temporarily increases the credit to $1,000 per child. Most eligible families will receive the $400 credit increase in the form of rebate checks to be sent out by the government starting in July. The new law also contains two provisions designed to help alleviate the so-called marriage penalty (the extra tax some working couples pay when they get married). The new law increases the basic standard deduction for married couples filing jointly from $7,950 to $9,500. The new law also widens the 15% tax bracket for marrieds filing jointly. Again, this means that couples above the 15% bracket will have more of their income taxed at the low 15% tax rate. For investors: The new law reduces the special tax rates on long-term capital gain (this is the profit you realize when you sell investment assets held for more than one year). Under the old rules, with certain exceptions, the maximum capital gains tax rate was 20% for taxpayers in a regular income tax bracket above 15%. For taxpayers in the 10% and 15% brackets, the maximum rate was 10%. The new law reduces the maximum rates to 15% and 5%, respectively, effective for sales after May 5, 2003.
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Sample Client Letter
The new law also reduces the tax investors (including owners of closely held corporations) pay on dividends. Under the old rules, dividends were taxed at ordinary income rates, the same rates that applied to salaries or interest income. But under the new law, most dividends will qualify for the new lower capital gain rates. For businesses: A tax law enacted in 2002 temporarily created a bonus depreciation allowance on the purchase of new equipment and machinery. The bonus allowance allows businesses to claim an immediate write-off of 30% from the cost of their purchases. The new law increases the bonus depreciation allowance to 50% for assets acquired after May 5, 2003. Depreciation for passenger automobiles has jumped to $7,650. The new law also increases the “Section 179” deduction for small businesses. Under the old rules, small businesses could immediately expense up to $25,000 of their equipment and machinery purchases annually in lieu of depreciation. The new law increases the Section 179 deduction to $100,000 and makes more small businesses eligible for the deduction. If you would like to discuss how the new law may impact your individual situation and what you can do to maximize your tax savings, please contact us, [Telephone Number]. Sincerely,
[First Name] [Last Name] [Title] [Firm Name]
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