Jan Zobel, EA, returning longtime OPEN EXCHANGE lister, can be found in our Accounting & Taxes category. Jan has prepared over 8,000 tax returns and specializes in working with self-employed people.

The Jobs & Growth Tax Relief Reconciliation Act of 2003, resulted in at least temporary savings for many taxpayers. However, each of the law's tax changes has a "sunset provision," meaning that it's in effect only for a limited number of years. And, since many states (including California) have not adopted the federal provisions, tax preparation will continue to be complex. Here are some of the changes that may affect your 2003 tax return:

Business Mileage Rate Goes Up
The deductible allowance for business miles in 2004 is 37.5¢, up from 36¢ a mile for 2003 returns. The allowance for medical transportation in 2004 increases to 14¢ a mile from 12¢. Miles driven for volunteer work also can be deducted at14¢.

New Depreciation Rules
Major items that are bought for a business get depreciated either over a period of years or all in one year. Prior to 2003, the most that could be depreciated in one year was $24,000 worth of items. The new tax law increased that amount to $100,000, making it possible, among other things, for Hummers (and other vehicles that weigh over 6000 pounds) to be deducted in full in the year of purchase.

California Use Tax Assessed
A new line on 2003 California tax returns asks taxpayers to report the "use tax" they owe. Use tax is assessed for purchased items on which sales tax wasn't paid. For example, when a computer or clothing is bought via mail order or over the internet, California sales tax is charged if the seller has a "nexus" or operating site (e.g. a store) in California. If the seller doesn't do business in California, the state wants to collect the sales tax that would have paid. That's the use tax.

Reduction in Capital Gain Rate
The new tax law reduces the 20% rate on capital gains to 15%. For those in the lowest tax brackets, the rate decreases from 10% to 5%. These rates are effective for sales after May 5, 2003, and before January 1, 2009.

Dividends Taxed at Capital Gain Rates
Dividends received from most corporations are now taxed at the same rates that apply to capital gains — 5% and 15%.

Nonprescription Drugs Sometimes Covered
The IRS has made it clear that only prescribed medications can be deducted as health costs on tax returns. However, a recent decision allows reimbursement for over-the-counter drugs if you have a flexible spending account or medical savings plan at work.

Decrease in Marriage Penalty
For a number of years, married couples, particularly those in which the spouses have similar incomes, paid more in tax than did two single people with the same income. The new tax law makes some adjustments for 2003 and 2004, minimizing this inequality. For years after 2004, the changes revert to the pre-2003 law.