One of the many changes made by the Jobs and Growth Tax Relief Reconciliation Act of 2003 includes the way capital gains will be taxed. While this change hasn't received as much press as the $400 advance child tax credit payment, it's something that will have a tremendous impact on your investment decisions.

Under the prior law, long-term capital gains (gains on those assets held for more than one year) were taxed at a maximum rate of either 20% or 10%, depending on your income. Additionally, there was also a provision in the old law that allowed for a reduced long-term gain rate of 18% or 8% if your gain was attributable to what was called "superlong-term gains."

But that's all changed now. The 2003 Tax Act reduces the old 20% rate to 15% and the old 10% rate to 5%.

So, for example, let's say you bought 1,000 shares of Microsoft (NASDAQ:MSFT) more than a year ago for $15 a share, and recently sold your stake for $25 a share, for a gain of $10,000. Under the old rules, the tax on that gain would have been $2,000 (assuming you're among the majority of investors whose long-term gains are taxed at the higher rate). But under the new law, the tax will only be $1,500.

Another change is that the provisions regarding superlong-term gains has been repealed and removed. There are no special 18% and 8% rates for capital assets held for the superlong-term period. For most of us, this repeal is no big deal. But for other folks who went the route of the "deemed sale election" in order to get a head start on the superlong-term gain holding period, this change cost them a few tax dollars.

When the deemed sale election was made, it was irrevocable. Now that the rug has been pulled out from under those investors who deemed their stock sold and paid taxes on those shares early, there is no provision in the new tax law to revoke that election and get a refund of any taxes that were previously paid. The silver lining is that those same folks no longer have to wait the required five years in order to benefit from the lower capital gains rates. They can sell after they've met their long-term holding period obligations and reap the benefits of the new 15% and 5% rates.

Also, under the old law, there were two other special capital gains rates. One was a 25% rate imposed on depreciation taken on the sale of real property. The other was a 28% gain on the sale of collectibles (such as guns and coins). The new 2003 Tax Act did not change those rates on those specialty gains.

The effective date for these changes applies to gains recognized after May 5, 2003. And that is where the nightmare begins. For 2003, you'll have to deal with multiple long-term gains rates: those in place before May 5, 2003 (20% or 10% for long-term gains and 18% or 8% for qualified five-year gains), and the rates in place after May 5 (15% or 5%).

The new Schedule D (and Schedule D Worksheet) will look like the doodle sheet for Einstein's theory of relativity. Many lines will have to be added to the Schedule D and worksheets. The simplified capital gains tax worksheet that allowed for the reporting of some capital gains without the necessity of preparing and attaching the Schedule D will be a thing of the past. It's simply going to be a mess. And the IRS already has big concerns that the mid-year effective date of this provision, coupled with the multiple rates involved, will cause complexity and burdens for taxpayers (ya think?), and that many returns will have errors.

It'll be more important than ever before to keep good and correct records on any assets that you sell, paying special attention to dates.

Here's some good news: For those of you looking down the horizon, the new 5% capital gains rate will be reduced to 0% (that's right -- nada, nothing, zilch!) in 2008.

But don't get too excited. All these new tax provisions sunset after 2008. Unless these changes are made permanent before then, the tax law will revert back to the way it was before the passage of the 2003 Tax Act. We still have a few years before the sunset provisions kick in, but remember that those provisions are out there.

I suspect that we'll see more than a few more changes to the tax law between now and 2008. So stand by and stay tuned.

Roy Lewis lives in a trailer down by the river and is a motivational speaker when not dealing with tax issues, and he understands that The Motley Fool is all about investors writing for investors. You can take a look at the stocks he owns as long as you promise not to ask him which stock to buy. He'll be glad to help you compute your gain or loss when you finally sell a stock, though.