You may be able to take a deduction if contributions (other than employer
contributions) were made to your HSA for 2004. See Form 8889 for details.
Tuition and fees deduction expanded
You may be able to deduct up to $4,000 if your adjusted gross income (AGI) is
not more than $65,000 ($130,000 if married filing jointly), or deduct up to
$2,000 if your AGI is higher than that limit but not more than $80,000
($160,000 if married filing jointly). See the instructions for Form 1040, line
27 in the Instructions for Form 1040.
Sales tax deduction
You can elect to deduct state and local general sales taxes insted of state and
local income taxes as an itemized deduction on Schedule A. Generally, you can
use either your actual expenses or the Optional State Sales Tax Tables to
figure your state and local general sales tax limitation. See the Instructions
for Schedule A for details.
Income averaging for farmers and fishermen
Fishermen can elect to use income averaging on Schedule J to reduce their tax.
Also, the benefit of income averaging is extended to farmers and fishermen who
owe the alternative minimum tax. See the Instructions for Schedule J for
details.
Unlawful discrimination claims
You may be able to take a decuction on Form 1040, line 35 for attorney fees and
court costs paid after October 22, 2004, for actions settled or decided after
that date involving a claim agains the United States Government, or a claim
made under section 1862(b)(3)(A) of the Social Security Act, but only up to the
amount included in gross income in 2004 from such claim. See Pub. 525 for
details.
Tax Computation Worksheet
If your taxable income is $100,000 or more, you will now use the Tax
Computation Worksheet instead of the Tax Rate Schedules to figure your tax.
The Tax Computation Worksheet is on page 72 of the Instructions for Form 1040.
The Tax Rate Schedules are shown on page 76 so you can see the tax rate that
applies to all levels of taxable income, but they should not be used to figure
your tax.
IRA deduction allowed to more people covered by retirement plans
You may be able to take an IRA deduction if you were covered by a retirement
plan and your modified AGI is less than $55,000 ($75,000 if married filing
jointly or qualifying widow(er)). See the instructions for Form 1040, line 25
that begin on page 26 of the Instructions for Form 1040.
Certain business expenses of reservists, performing artists, and fee-basis
government officials
Thes expenses are now reported on Form 1040, line 24. See the instructions for
line 24 on page 26 of the Instructions for Form 1040.
Earned income credit (EIC)
You may be able to take the EIC if:
A child lived with you and you earned less than $34,458 ($35,458 if married
filing jointly), or
A child did not live with you and you earned less than $11,490 ($12,490 if
married filing jointly).
If you were a member of the U.S. Arned Forces who served in a combat zone, you
may be able to include your non-taxable combat pay in earned income when
figuring the EIC.
See the instructions fo rlines 65a and 65b that begin on page 41 of the
Instructions for Form 1040.
Additional child tax credit expanded
The credit limit based on earned income is increased to 15% of your earned
income that exceeds $10,750. If you were a member of the U.S. Armed forces who
served in a combat zone, your nontaxable combat pay counts as earned income
when figuring this credit limit. See Form 8812 for details.
Standard mileage rates
The 2004 rate for business use of your vehicle is 37.5 cents a mile. The 2004
rate for use of you vehicle to get medical care or to move is 14 cents a mile.
Qualified tuition program (QTP) distributions
You may be able to exclude from income distributions from a private QTP if the
distributions are not more than your qualified higher education expenses. See
Pub. 970.
Elective salary deferrals
The maximum amount you can defer under all plans is generally limited to
$13,000 ($16,000 for section 403(b) plans if you qualify for the 15-year rule).
The catch-up contributions limit increased to $3,000 ($1,500 for SIMPLE
plans). See the instructions for line 7 on page 19 of the Instructions for
Form 1040.
Excise tax on insider stock compensation from an expatriated corporation
Yo may owe a 15% excise tax on the value of nonstatutory stock options an
certain other stock-based compensation held by you or a member of you family
from an expatriated corporation or its expanded affiliated group in which you
were an officer, director, or more-than-10% owner. See the instructions for
line 62 on page 40 of the Instructions for Form 1040.
Decutions for clean-fuel vehicle
You can claim the maimum amount allowed for a clean-fuel vehicle or other clean-fuel vehicle property you placed in service in 2004. The 25% reduction of the maximum amount for 2004 has been elimanated. See Pub 535, Chapter 12 for more infomation on the deduction
Tax credit for qualified electric vehicle
You can claim the maximum tax credit allowed for a qualified electric vehicle you placed in service in 2004. The 25% reduction of the maximum credit for 2004 has been elimanated.
Educator expenses
The deduction as an adjusment to gross income for educator expenses was scheduled to expire at the end o f2004. However, the provision has been extended until the end of 2005. the expenses can be deducted on Form 1040, line 23, or on Form 1040A, line 16.
Student loan interest deducton
the person legally obligated to make interest payments on a student loan may be able to deduct the interest payments on that loan made by someone else.
Tuition and fees deduction increased
The amount of qualified education expenses you can take into account in figuring your tuition and fees dedcution has increased.
Hope of Lifetime Learning Credit income limits increased
Te amount of income you can have and still recieve a Hope or Lifetime Learning credit has increased.
Standard deduction
The standard deduction for taxpayers who do not itemize deductions on Schedule A (Form 1040) has increased. The amount depends on your filing status.
Filing Status
Standard Deduction Amount
Single
$4,850
Married Filing Jointly
$9,700
Married Filing Separately
$4,850
Head of Household
$7,150
Qualifying Widow(er)
$9,700
Exemption Amount
You are allowed a $3,100 deduction for each exemption to which you are entitled. However, your exemption amount could be phased out if you have high income.
Limit on itemized deductions
Some of your itemized deductions may be limited if your adjusted gross income (AGI) is more than $142,700 ($71,350 if you are married filing separately).
Tax benefits for adoption
The adoption credit and the maximum exclusion from income of benefits under an employee's adoption assistance program are increased to $10,390. See Adoption Credit in Pub. 968, Tax Benefits for Adoption.
Social Security and Medicare taxes
The maximum wages subject to social security tax (6.2%) increased to $87,900. All wages are subject to the Medicare tax (1.45%).
Mailing your return
You may be mailing your return to a different address this year because the IRS
has changed the filing location for several areas. If you received an envelope
with your tax package, please use it. Otherwise, see
Where Do You File?
on the back cover of the Instructions for Form 1040.
All information provided is
general in nature and intended to create awareness, not to
address the specific circumstances or concerns of any individual
or entity. Although we try to provide correct and timely
information, we cannot guarantee the accuracy of any information
or that such information will continue to be accurate in the
future due to the changing nature of the tax laws. Before acting
on any of the information provided here, you should consult with
a professional advisor who knows all of the unique facts and
circumstances pertinent to your particular situation.
Tax Info Newsletter