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Bush signs new tax cuts into law

(May 28, 2003) - The 2003 tax changes provide a temporary reduction in tax rates on dividends and capital gains. Through the year 2008, the maximum rate on dividends is lowered from the 35% ordinary tax rate to 15%, and the maximum rate on capital gains is lowered from 20% to 15%. Individuals in the 10 percent and 15 percent regular tax brackets enjoy an even-lower 5 percent tax rate on dividends and capital gains through the year 2007, and zero percent in the year 2008.

The tax cuts mean that the comparative tax advantage of 529 plans and Coverdell ESAs is reduced. It will be up to Congress and the President to decide in the future whether the newest tax cuts extend beyond the current expiration date of December 31, 2008.

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