1040 Tax Estimator

The recent passage of the "Jobs and Growth Tax Relief Reconciliation Act of 2003" will affect almost every taxpayer in the U.S. Enter your filing status, income, deductions and credits we will estimate your total taxes for 2003. Based on your projected withholdings for the year, we can also estimate your tax refund or amount you may owe the IRS next April.

This Financial Calculator requires a Browser with Java Support

Definitions

Jobs and Growth Tax Relief Reconciliation Act of 2003

The tax bill passed in 2003 included some significant, often temporary, and somewhat confusing changes. This is in addition to the already complex tax code changes passed by Congress in 2000. Below is a summary of the changes that impact most taxpayers in 2003.

Child tax credit: The child tax credit has been increased from $600 to $1,000 for 2003 and 2004. Starting in 2005 the tax credit returns to the level originally passed in the 2000 tax bill. The credit is, however, still phased out for higher incomes. This calculator assumes that all dependents claimed qualify for the child tax credit. For 2003, the additional credit of $400 per child is scheduled to be automatically sent out to taxpayers. This calculator treats this check, as does the IRS, as nothing more than early refund of your 2003 taxes. If you receive a payment from the IRS the Child Tax Credit you receive on your 2003 tax return will be reduced by that amount, but not below zero.
Marriage penalty relief: The new law changes 2003 and 2004's standard deduction for married couples filing jointly and qualified widowers to be double that of single tax filers. This means that the standard deduction for these filers increases from $7950 to $9500 for 2003. After 2004, the standard deduction will revert back law passed in 2000.
In addition to the increased standard deduction the 15% tax bracket has been increased for married tax filers to further reduce the impact of the marriage penalty. Like the standard deduction change, this change is only for 2003 and 2004.
The 10% tax bracket: In 2003 single taxpayers will pay 10% of income upto $7,000, increased from $6,000 under the old law. Likewise married couples filing jointly will have an increase from $12,000 to $14,000. These amounts are indexed for inflation in 2004, and revert back to the old law's rules in 2005.

Lower tax rates: The new law accelerates rate reductions for all brackets above 15%:

Filing Status and Income Tax Rates 2003
Revised Tax Rate Schedules for the "Jobs and Growth Tax Relief Reconciliation Act of 2003"

Tax rate Married filing jointly
or Qualified Widow(er) Single Head of household Married filing separately

10% $0 - 14,000 $0 - 7,000 $0 - $10,000 $0 - 7,000

15% $14,001- 56,800 $7,001- 28,400 $10,001- 38,050 $7,001- 28,400

25% $56,801- 114,650 $28,401- 68,800 $38,051- 98,250 $28,401- 57,325

28% $114,651- 174,700 $68,801- 143,500 $98,251- 159,100 $57,326- 87,350

33% $174,701- 311,950 $143,501- 311,950 $159,101- 311,950 $87,351- 155,975

35% over $311,950 over $311,950 over $311,950 over $155,975

Reduced Taxes on Capital Gains: The capital gains tax rates of 15% and 20% have been reduced to 5% and 15% respectively. These capital gains rates are for property that was held for at least one year. You should note that the new rates only apply to the sale of assets after May 5, 2003. The old rates still apply to any sale between January 1st and May 5th of this year. This calculator assumes that all of your long term capital gains are taxed the new rates of 5% and 15%.
Reduced Taxes on Dividends: The new law applies the capital gains tax rates to dividends. Taxpayers in the 10% or 15% bracket pay a 5% rate of tax on dividends paid between January 1, 2003, and December 31, 2007, and zero percent in 2008. Taxpayers in tax brackets above 15% pay a 15% rate of tax on dividends paid between January 1, 2003, and December 31, 2008.
Alternative Minimum Tax (AMT): The new tax law increases the AMT exemption for married filers to $58,000. It is also increased to $40,250 for single filers. Please note that calculating the impact of AMT on your taxes is beyond the scope of this calculator. Please see your tax professional of assistance if you believe that you will be required to pay the AMT.
IRA and retirement plan deductions: The new tax law did not change IRA deduction and contribution limits. However, the 2000 tax code changes increased the amount most individuals qualify for to $3,000. Those over 50 can contribute $3500.

Dependents

A dependent is someone you support and for whom you can claim a dependency exemption. Each dependent you claim entitles you to receive a $3,050 reduction in your taxable income. In 2003 each dependent under the age of 17 also receives a tax credit of $1000. The credit is, however, phased out for at higher incomes.

Total exemptions claimed

Each exemption you claim reduces your taxable income by $3,050 for 2003. You receive an exemption for yourself, your spouse and one for each of your dependents.

Capital Gain or Loss

This is the total capital gain you realized from the sale of assets. This calculator allows you to enter your total short term capital gain for investments held less than one year and your total long term gain for investments held at least one year. Any amount you enter as a short term capital gain is taxed as normal income. Any amount you enter as a long term capital gain is taxed as follows:

This calculator assumes that all of your long term capital gains are taxed at either 5% or 15%. This may not be the case if you sold any assets between January 1st and May 5th in 2003. Assets sold during this time period are still subject to the older (and higher) capital gains tax rates of 10% and 20%.
The tax is 5% for the portion of your gain that would have been taxed at 15% or lower tax if it were a short term gain.
The tax is 15% for any of your capital gain that would have been taxed at a rate higher than 15% if it were considered a short term gain.
This calculator assumes that none of your long term capital gains come from collectibles, section 1202 gains or unrecaptured 1250 gains. These types of capital gains are taxed at 28%, 28% and 25% respectively (unless your ordinary income tax bracket is a lower rate).

For more information on capital gains tax rates and how they are applied, you may wish to read IRS Publication 17: Your Federal Income Taxes.

Income from Schedule E

Rental real estate, royalties, partnerships, S Corporations, trusts, etc.

Total income

Total income calculated by adding lines 7 through 21 on your form 1040. For most taxpayers this includes wages, salaries, tips, interest, dividends and gains and losses from a variety of activities.

Adjusted gross income

Adjusted gross income (AGI) is calculated by subtracting all deductions from lines 23 through 33 from your total income. AGI is used to calculate many of the qualifying amounts if you itemized your deductions.

Taxable income

Your total taxable income is your AGI minus your itemized or standard deduction, and your deduction for exemptions.

Tax

This is the total federal income tax you owe for 2003 before any tax credits.

Total credits

Your total tax credits. This amount is subtracted from the total tax amount.

Total tax after credits

This is the total federal income tax you will need to pay in 2003.

Total other taxes

Any other taxes that you owe for 2003. This includes self-employment tax, alternative minimum tax, and household employment taxes.

Total tax

Grand total of your 2003 Federal tax bill.

Total payments

Total of all tax payments made in 2003. This includes tax withheld from Forms W-2 and 1099, and estimated taxes paid, earned income credit and excess social security tax withheld.