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Important Tax Changes
For 2005
There have been lots of changes in the tax rules. Many are mandated by indexing, that is, annual upward adjustments to provide relief from inflation, as measured by increases in the Consumer Price Index. What follows are the highlights of several changes that might help or hurt you. Personal Exemptions: You get a bigger break just for being you. Exemptions are worth $3,200 a piece for 2005, up slightly from $3,100 for 2004. Reductions of Exemptions: For upper-incomers with AGIs (short for adjusted gross income, the figure on the last line of page one of Form 1040) above certain levels, the deductions for all exemptions—including those for a spouse and dependents—gradually decline. For 2005, the exemption phase-out starts when AGI surpasses $145,950 for singles, up from 2004's $142,700; $218,950 for joint filers, up from $214,050; $182,450 for heads of household, up from $178,350; and $109,475 for married persons filing separately, up from $107,025. Partial Disallowance of Itemized Deductions: Most itemized deductibles must be reduced by 3 percent of the amount by which your AGI exceeds a specified amount—$145,950 for 2005, up from $142,700 from 2004. Stated differently, you forfeit $30 in total 2005 deductions for every $1,000 of AGI above $145,950 if you are single or filing jointly. The $145,950 figure plummets to $72,975 if you are married and file a separate return; going that route does not raise the threshold for a couple to a combined $291,900, cautions CCH, Inc., the Riverside, Illinois publisher of tax and other business information and software. Standard Deductions: The standard deduction is the no-proof-required amount that is automatically available without having to itemize for outlays like real estate taxes and charitable donations. Just how much of a standard deduction you get depends on your filing status and age. The normal standard deductions are $10,000 for joint filers; $5,000 for married persons filing separately and singles; and $7,300 for heads of household. Extra-Large Standard Deductions For the Elderly and Blind: For those individuals who are at least 65 by the close of the 2005 tax year, the standard deduction increases by $1,000 for a married person, (whether filing jointly or separately) and $1,250 for an unmarried person. Persons who are considered blind are entitled to those additional amounts or double those amounts if they are both 65 and blind. Caution: Special rules lessen the deduction amounts allowed individuals (children, mostly, or elderly parents) who can be claimed as dependents on the returns of other people. The standard deduction can be as little as $800. Julian Block is a
syndicated columnist, attorney and former IRS investigator who has been cited
by the New York Times as "a leading tax professional" and by the Wall Street
Journal as an "accomplished writer on taxes." His "Tax Tips For Freelance
Writers, Photographers and Artists" shows how to save truly big money on taxes
"legally" and explains the steps you should take to reduce taxes for this year
and even gain a head start for future years. Send $9.95 for an e-mailed copy
or $14.95 for a postpaid copy to: You may e-mail Julian at julianblock@yahoo.com |
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