What's new under the law:

Gradual cuts in income-tax rates will start benefiting individual taxpayers almost immediately. A new 10% rate has been added, and other rates are lowered on the schedule shown in the accompanying table. By 2006, the highest marginal rate will be almost five percentage points lower- 35% versus 39.6% before the new law.

Higher-income taxpayers will also benefit because they will no longer lose personal exemptions or have their itemized deductions reduced, both of which effectively raise their tax rate. Unfortunately, however, these changes won't begin to take effect until 2006, with full repeal slated for 2010.

Higher income individuals should see their tax burdens reduced, but slowly. Capital Gains tax rates aren't altered by the new law and will continue to be attractive compared to all but the lowest of the new tax rates on ordinary income. Shifting income to children or other family members in lower tax brackets still makes sense, although the so-called "kiddie tax" rules remain in effect to limit the benefits that can be derived from shifting income-generating investments to a child who is under age 14. Note that, after full phase-in, the difference between the highest and lowest regular tax rates is 25 percentage points -about the same as the difference under prior law although the so-called "kiddie tax" rules remain in effect to limit the benefits that can be derived from shifting income-generating investments to a child who is under age 14. Note that, after full phase-in, the difference between the highest and lowest regular tax rates is 25 percentage points -about the same as the difference under prior law.

The potential impact on you:

• The gradual phase-in of the rate reductions may prompt taxpayers to find ways to accelerate tax-deductible expenses into higher-rate years and defer tax- able income into lower-rate years. Possibilities include: .Making large charitable contributions in years the itemized deduction will be most beneficial. This may mean making donations sooner than originally planned, before your effective tax rate drops.
  
  

• Arranging for a year-end bonus to be paid to you early in the next year if you anticipate that your income will be taxed at a lower rate in the later year.
  
  

• Delaying taxable withdrawals from your IRAs to take advantage of lower tax rates in future years.
  
  

• Deferring the exercise of nonqualified stock options (normally a taxable event) to a later year to benefit from lower rates.