All told, U.S. farm households are expected to see about $4 billion in tax relief, according to a USDA Economic Research Service analysis of the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Agriculture Secretary Ann Veneman said savings from the new law will include $2.3 billion from the acceleration of reductions in income-tax rates, marriage penalty relief and the increased child credit and $1 billion from increasing the bonus first-year depreciation and the amount of capital investment that can be expensed from $25,000 to $100,000.
"By ensuring that millions of Americans keep more of their own money to invest and spend, this legislation will help spur the economic recovery," said Veneman. "The final bill continues to mean significant savings for farm families, which will receive over $4 billion in tax relief in 2003."
Veneman said that the President's plan, which was signed in to law on May 28, will benefit over 86 percent of all farm households with an average tax reduction in 2003 of $2,000 or a 16 percent savings.
An analysis of the plan, prepared by USDA's Office of the Chief Economist, estimates that farmers will save $700 million from the reduced tax rate on dividends and $500 million from the reduced tax rate on capital gains.
Additional savings will also come from the increase of $9,000 for married taxpayers and by $4,500 for single taxpayers of the alternative minimum tax (AMT) exemption, which will allow most farmers to fully benefit from the tax cuts.
The reduction in dividend tax rates to 15 percent (5 percent for taxpayers in the 15 percent or lower income tax bracket) will benefit one third of all farm households and over half of all households with a farmer over the age of 65, with an average savings of $1,200.
The tax rate on capital gains, an important income source for 45 percent of all farmers, will be reduced to 15 percent (5 percent for taxpayers in the 15 percent or lower income tax bracket) and will generally apply to sales on or after May 6, 2003. While farmers will save an estimated $500 million in 2003, the benefit will increase to $750 million in 2004, when the new rate will be effective for the entire year.
The increased expensing of capital investment, raising bonus first-year depreciation from 30 to 50 percent and raising the amount of investment that can be expensed from $25,000 to $100,000, will allow 98 percent of all farmers to deduct their entire investment and simplify their record-keeping requirements.
For 2003, the amount of farm machinery and equipment that can be immediately deducted is estimated to increase by about $3.5 billion or 25 percent.
For a complete fact sheet on how American farmers and ranchers benefit from President Bush's Jobs and Growth Tax Relief Reconciliation Act, visit http://www.usda.gov.