Tax Tip of the Week
For the week of October 11, 2004

Factor new tax law into your tax planning

On October 4, 2004, President Bush signed the Working Families Tax Relief Act of 2004 into law. It’s the fourth tax law in as many years. As you consider ways to minimize your tax bill for 2004 and 2005, be sure to factor this latest round of tax revision into your planning.

The new law is essentially an extension of provisions that either had expired or that were scheduled to expire at the end of 2004. Here’s a quick overview of the extended tax breaks:

• The $1,000 per child tax credit will remain at that level through 2010 instead of dropping back to $700 in 2005.
    
• The accelerated marriage penalty relief set to revert to previous levels next year will be extended through 2010. The 15% tax bracket and the standard deduction for married couples will remain at double those of single taxpayers.
    
• The expanded 10% tax bracket continues through 2010.
    
• The higher exemption from the alternative minimum tax will apply through 2005 instead of reverting to lower levels as previously scheduled.
    
• The $250 above-the-line deduction for classroom expenses paid by teachers is extended for 2004 and 2005. It originally expired at the end of 2003.
    
• The full $2,000 deduction for the purchase of clean-fuel vehicles is reinstated for 2004 and 2005.
    
• The business tax credits for research and development, welfare-to-work, and work opportunity are extended through 2005.

The law also includes a number of technical corrections relating to previous tax laws, a uniform definition of “child” throughout the tax code, and provisions aimed at tax relief for low-income and military families.

Give us a call for assistance in tax planning at year-end with this most recent set of tax changes in mind.

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