Tax Tip of the Week
For the week of November 1, 2004

The American Jobs Creation Act of 2004
could have tax breaks for you

Tax cuts, tax incentives, and tighter reporting requirements for businesses and individuals. They’re all part of the American Jobs Creation Act of 2004 — and chances are good many aspects of this new law will affect you.

Here’s an overview of provisions in the law which was signed by President Bush on October 22.

Depreciation. Changes to asset expensing rules have the potential to impact tax planning for the next three years.

• The expanded dollar amount you’re allowed to write off for purchases of qualifying business property, including off-the-shelf software, is extended through 2007. (For 2004, the deduction is $102,000.)
   
• Commercial leasehold improvements and qualifying restaurant property can now be depreciated over a 15-year life rather than over 39 years.
   
• When you buy an SUV for business use, the maximum you can expense immediately has been limited to $25,000.

Itemized Deductions. For 2004 and 2005, you’ll have the option of deducting state and local income taxes or sales taxes on your federal tax returns. The sales tax deduction can be based on actual expenses or a table to be released by the IRS. If you use the table, tax paid on specified purchases, such as vehicles or boats, can be used to increase the amount you claim.

Donations. Starting in 2005, when you contribute a vehicle worth more than $500 to a charity, your donation will be limited to the amount the charity receives upon the vehicle’s sale.

Manufacturing Deductions. The new law provides a deduction for "production activities" of certain businesses, including, among others, those in manufacturing, construction, and engineering. You may be eligible for a deduction of up to 3% of qualified income for tax years 2005 and 2006.

Additional changes include revisions to S corporation and deferred compensation rules and tax breaks for farmers. Please call for an analysis of how these new rules will affect you and your business.

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The information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

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