State's Income Tax Rates Drop for 2003 Due to Indexing

California taxpayers will pay slightly less in income taxes next year due to indexed tax rates for 2003, announced the Franchise Tax Board (FTB).

"Our tax system is based on fairness and indexing the state's tax rates ensures that people do not pay more in taxes year to year simply because of inflation," said State Controller and FTB Chair Steve Westly.

The tax rates have been indexed by 2.2 percent for the 2003 tax year, which means that the average family will pay less in state income taxes if their income was unchanged from last year. Indexing takes the inflation rate into account and adjusts tax brackets, filing requirement thresholds, the standard deduction, and certain credits. The FTB computes the indexed values using the inflation rate as measured by the California Consumer Price Index for all urban consumers from July 1, 2002 to June 30, 2003. Last year's inflation rate measured 1.5 percent.

The FTB designs the minimum filing requirement thresholds to ensure that most people who will not owe taxes are not required to file a tax return. The FTB adjusts these tables each year to include the added senior exemption and the dependent exemption credits. The tax threshold, the amount of income reached where a tax liability is incurred, has risen to $10,177 of adjusted gross income for single and married filing separate taxpayers and $20,302 for married, surviving spouse, and head of household taxpayers.

The standard deduction will increase for single or married filing separate taxpayers from $3,004 to $3,070. For married, qualifying widow(er), or head of household taxpayers, the standard deduction increases from $6,008 to $6,140. The personal exemption credit increases for single, married filing separate, or head of household taxpayers from $80 to $82 and for married or surviving spouses from $160 to $164. The dependent exemption credit changes from $251 to $257 for each dependent.

Other tax credits affected by indexing include the Joint Custody Head of Household Credit, Dependent Parent Credit, Qualified Senior Head of Household Credit, and the Renter's Tax Credit.

Editor's Note: See the attached chart for tax rates and filing requirement amounts.

2003 California Tax Rate Schedules

2003 Filing Requirement Amounts

Gross income more than:

Adjusted gross income more than: