What do the new tax law changes passed by Congress on May 23, 2003 mean for you? How do they affect decision-making on tax and financial planning issues? Unfortunately, the answer for the moment is, "it depends."

The following link is for Andrew Martin's customized interpretation of how the 2003 tax law changes effect our individual clients:

Since a large part of the 2003 tax law changes are acceleration of provisions from the 2001 tax law changes and many of those provisions sunset, it is also worthwhile reading our strategies for tax law changes in 2002 for a context for the new tax laws.

Additionally, the following pages provide government-prepared overviews of the tax law changes enacted in 2003 that provide some more in-depth analysis of some of the business and family provisions:

Lastly, we thought we would present a few caveats for your consideration:

The tax code is changing every year. Planning your financial life under an ever-changing tax code is extremely challenging. While the tax law changes in 1997 passed with significant bi-partisan support and enacted some permanent, structural changes to the tax code (like establishing Roth IRAs, educational tax credits, student loan interest deduction, child tax credits, lower capital gains rates, and special capital gains exclusions for sale of a principal residence), the tax law changes in 2002 were more controversial, were temporary (with phase-ins and sunsets) and focused principally on tax rate reductions and more liberal rules for funding retirement plans. The most recent tax law changes passed on a tie vote in the Senate (broken by the Vice President), on the eve of a Presidential election year, ballooning budget deficits, and a sluggish economy. Accordingly, everything passed a few days ago could be reversed or expanded, depending on the results of the 2004 Presidential and Congressional elections. This uncertainty encourages us to develop tax and financial strategies that are flexible, quick to implement or change, and with a shorter time horizon than normal.

Beware of AMT and Phase Outs. The alternative minimum tax is designed to increase taxes collected from higher-income earners without overtly raising marginal income tax rates. Over the past few years, the trend has been that more and more middle-income taxpayers with large tax credits or itemized deductions have been affected by AMT. The Treasury Department estimates 2.3 million people were affected by AMT last year. The recent tax law changes have raised the AMT exemption amounts in 2003 and 2004. Unfortunately, this is only a minor change that will have a minimal impact on the manner in which AMT effects taxpayers. In addition to AMT, as income reaches a certain level, itemized deductions become limited. The combination of these factors can dramatically alter taxes paid. Accordingly, we have developed tax strategies to deal with these circumstances, including precision allocation of shared income and deductions between gay & lesbian couples.

There is extreme financial pressure on state and local governments. This could lead to tax increases at the state and local level that offset federal tax reductions and add yet one more level of complexity to tax and financial planning strategies. Many states already have certain add-backs or exclusions that nullify federal tax policy as a means to raise tax revenues without raising marginal tax rates. Before rushing to capitalize on any changes in federal tax law, be sure to think through impacts on state and local taxes as balanced budget requirements force potentially extreme fiscal policy decisions.