2003 tax changes include increased deductions

MAT-SU -- Taxpayers, especially those preparing their own tax returns, often have questions that need to be answered by a professional, perhaps even the Internal Revenue Service itself. The following is a look at some of the basic changes in tax preparation and laws for 2003:

Both the 10 percent and 15 percent income tax brackets have expanded.

Tax rates at 25 percent, 28 percent, 33 percent and 35 percent have lowered.

Standard deduction has increased to $4,750 for single taxpayers, $7,000 for head of household and $9,500 for couples filing as married filing jointly. The latter eliminates the so-called "marriage penalty."

The Child Tax Credit has increased from $600 to $1,000 per qualified child.

More taxpayers may qualify for the Earned Income Tax Credit this year. The new limits are less than $33,692 with more than one qualifying child, less than $29,666 with one qualifying child and less than $11,230 with no qualifying child. All EITC income limits are $1,000 higher if the taxpayers file as married filing jointly.

Capital gains now have new rates, and those with investment income will need to use a new Schedule D. For gains after May 5, 2003, the 10-percent rate is reduced to 5 percent and the 20-percent rate is reduced to 15 percent. Dividends paid after Dec. 31, 2002, will be taxed at the new capital gain rates.

Remember, for federal tax purposes, the Alaska Permanent Fund dividend is considered "Other Income" and not dividend income.

This year the IRS is encouraging taxpayers to visit its Web site at IRS.gov and take advantage of 1040 Central, an electronic service that provides up-to-date tax information and other services, including "Get Ready to File," which provides links to information about the Earned Income Tax Credit, the 2003 Advance Child Tax Credit and commonly used forms and tax instruction; "File Your Return," which provides links to IRS e-file and Free File; "After You File," which includes the interactive "Where's My Refund?" that allows taxpayers to track the status of their refund.