December 6, 2004

 

Save More By Donating Autos in 2004 v. 2005

            because the American Jobs Creation Act of 2004 toughens the rules for donations of autos after 12/31/04.  The Act limits the deduction for which the claimed value exceeds $500, by making it dependent upon the charity’s use of the vehicle and imposing higher substantiation requirements.  If the charity immediately sells the vehicle, the donation cannot exceed the gross proceeds from the charity’s sale.

            An illustration of the new law is that a taxpayer donates a car with a “blue book” value of $1,000.00 to a charity which immediately sells it to a wholesaler for $300. If he donates the car in December 2004, a deduction of $1,000 can be claimed.  If it is donated in 2005, only $300 can be claimed.  If the charity did not sell the vehicle but instead used it, the deduction for 2005 is $500. RIA Weekly Alert 10/21/04 p.517

 

Depreciation Breaks

            Improvements done for tenants after October 2004 and before 2006 can be written off over 15 years as opposed to 31.5 years under current law.  This was part of the Corporate Tax Bill passed just before the election. Kiplinger Tax Letter 10/8/04

 

New Sales Tax Deduction

            for filers that have no state income tax i.e. Florida, Nevada, Alaska, South Dakota, Texas, Washington and Wyoming.  All filers can deduct state and local sales tax in lieu of state income tax. Additionally, you can add the sales tax on a vehicle purchased to the IRS approved table of deductible sales taxes. (For those of you old enough to remember this pre-1986 tax deduction, it’s back!  The more things change the more things remain the same!) Kiplinger Tax Letter 10/8/04

 

Watch Out For AMT

            If you are subject to it, you will lose your deduction for state income taxes, state sales taxes, property taxes, miscellaneous itemized deductions and certain home equity loan interest. Kiplinger Tax Letter 11/5/04

 

Hurricanes

            and other causes of presidentially declared disaster areas in 2004 can cause the resulting casualty losses to be claimed on tax returns for 2003 or 2004.  Kiplinger Tax Letter 11/5/04

 

Capital Gains

            are back.  If you have them, consider taking capital losses to reduce your overall tax bill.  Capital losses can offset all your gains and up to $3,000 of other income. Kiplinger Tax Letter 11/5/04

 

But Beware the Wash Sale Rule

 

Exchange Your Positions

            into equities that pay dividends.  Qualifying dividends are taxed at low capital gains rates of 15% or less. Kiplinger Tax Letter 11/5/04

 

Businesses that Defer Income to 2005

            may yield a bonus.  They can take a special 3% income tax deduction on profits they derive from domestic manufacturing and production activities. The new tax break is available to corporations, S corporations, sole proprietorships and partnerships.  This boondoggle will allow businesses, like restaurants, a deduction because they produce a meal! RIA Weekly Alert 10/14/04

 

Nationwide Adds Program for Life Insurance Without Medical Requirements

            Nationwide Financial Services has said it is now possible for those who purchased term life insurance policies within the past two years from other selected providers to add permanent coverage without having to meet any current medical requirements. Ticker, March 2004 p.7

 

            If this is of interest to you, please call Howard Lisch for he is a life insurance agent.

 

            From all of us, to all of you, have a very Happy Holiday Season and a Healthy, Happy and Safe New Year!!