DALLAS (BP)–Recent changes could affect your 2004 federal income tax return and your tax planning for 2005. Here are some highlights:
— Taxpayers who itemize can choose between deducting their state and local income taxes or their sales taxes. This change will have the greatest impact on taxpayers who live in states without state income taxes, such as Texas and Florida — and it will affect both 2004 and 2005 returns. The IRS will provide tables for taxpayers who don’t want to save all their receipts, but taxpayers can add taxes paid on cars and boats to the amounts on the tables. Look for changes on Schedule A and for tables in Publication 600. That publication is available on the IRS website, www.irs.gov.
— The standard mileage rate for business miles driven in 2005 is 40.5 cents, up from 37.5 cents in 2004. The standard mileage rate for deductible medical expenses and moving expenses is 15 cents in 2005, but remains at 14 cents for services to a charitable organization.
— The maximum amount of wages subject to Social Security (“old-age, survivor and disability”) tax is $90,000 in 2005. Wages above that amount are still subject to Medicare tax.
The maximum allowable IRA contribution for taxpayers under age 50 jumps to $4,000 in 2005 from $3,000 in 2004. Special catch-up contributions are available for eligible taxpayers who are 50 or older. Some taxpayers will also benefit from increased contribution limits to 403(b) or 401(k) retirement plans.
Tax law changes may mean that you’ll pay less in 2005 even if your income stays the same. You may need to adjust your withholding or your estimated tax calculations after estimating what you’ll owe.
This is only a brief overview of some of the changes that could affect your federal income tax return. Be sure you consult other sources, including a competent tax professional, if you need more help.
Ministers can learn more about tax developments affecting them in GuideStone’s annual Ministers Tax Guide for 2004 Returns. Look for it on our website site at www.GuideStone.org.
Julie Bloss is a communications attorney for GuideStone Financial Resources of the Southern Baptist Convention.