Tax Changes You Should Know for 2005 Returns
Below is a MRR and PLR article in category Finance -> subcategory Taxes.
Essential Tax Changes for Your 2005 Returns
As you prepare your tax returns this year, it’s important to be aware of the changes that have taken effect in 2005. Here’s a summary of the key updates you should consider.
Key Changes for 2005
While 2005 didn’t bring major overhauls to the tax code, there were some important tweaks. The IRS has also made efforts to simplify certain forms.
1. Automobile Donations to Charities
This year, the rules for donating a car to charity have changed. Instead of deducting the fair market value, you can now only claim the deduction based on the actual amount the charity received from auctioning the vehicle. Ensure you have the necessary documentation from the charity to confirm this amount.
2. Business Mileage Allowance
For 2005, the business mileage rate follows a two-tier system. For miles incurred in the first eight months, the deduction is 40.5 cents per mile. From September to December, it jumps to 48.5 cents per mile due to rising gas prices.
3. Increased Exemption Amount
Good news: the exemption amount on tax returns has increased to $3,200 per exemption. However, remember that these exemptions are adjusted based on your gross earnings, with reductions for higher earners. Check the tax tables relevant to your filing status for detailed information.
4. Standard Deduction Update
The standard deduction for non-itemizers has also increased. As always, it varies by filing status, so be sure to verify the numbers on your specific 1040 form.
5. Earned Income Tax Credit Adjustments
The income threshold for claiming the Earned Income Tax Credit (EITC) has increased. This is particularly beneficial for low-income taxpayers, reducing the amount of tax owed. The exact amount depends on your filing status and the number of children you claim, so consult your tax form for specifics.
6. Special Considerations for Hurricane Katrina Victims
If you lived in an area affected by Hurricane Katrina, the IRS is offering significant tax relief. Visit the IRS website for comprehensive information on these concessions.
Final Thoughts
The tax changes for 2005 may not be drastic, but they are essential to understand as you prepare your returns. Stay informed to ensure accuracy in your filings.
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