Tax Cuts: Changes to Tax Law for 2005
Submitted by boss on Fri, 2006-02-10 12:26.
IRS TAX TIP 2006-26
Taxpayers should make sure that they are aware of important changes to the tax law before they complete their 2005 federal income tax forms. Here are some significant changes that may affect you when completing your 2005 federal tax return:
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Donating Cars to Charity Beginning in 2005, if you donate a car to a qualified charitable organization, your deduction is generally limited to the gross proceeds from its sale by the organization.
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Uniform Definition of a Qualifying Child Beginning in 2005 one definition of a qualifying child will apply for each of the following tax benefits: dependency exemption, head of household filing status, Earned Income Tax Credit, Child Tax Credit and Credit for Child and dependent care expenses.
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Exemption Amount The amount you can deduct for each exemption has increased to $3,200. You lose all or part of your exemption benefits if your adjusted gross income is above a certain amount. The amount at which the phaseout begins depends on your filing status.
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Traditional IRA Income Limits If you have a traditional individual retirement account and are covered by a retirement plan at work, the amount of income you can have and not be affected by the deduction phaseout increases. The amounts vary depending on filing status.
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Standard Deduction The standard deduction for taxpayers who do not itemize deductions on Schedule A of Form 1040 is, in most cases, higher for 2005. The amount depends on your filing status, whether you are 65 or older or blind and whether an exemption can be claimed for you by another taxpayer.
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Earned Income Tax Credit The maximum amount of income you can earn and still get the credit increases in 2005. The income limits depend on your filing status and the number of children you have.
For more information, visit the IRS Web site at IRS.gov. Also, see Publication 553, Highlights of 2005 Tax Changes, and the instruction book for Form 1040.
Source: Internal Revenue Service.