BUSINESS

New tax laws may change your tax strategy

Practice Pointers. By Cathy B. Goldsticker, AMNews contributor. Nov. 15, 2004.

Answers to questions about the business side of your practice

Question: Now that Congress has approved and the president has signed another new tax act, I feel uncertain about my 2004 tax bill, my tax outlook for 2005 and what deductions our practice might have lost. Do you have any guidance for me?

Answer: It is not surprising that you are befuddled. Congress has recently passed two significant tax acts within one month of each other that contain a wide variety of tax law changes.

The Working Families Tax Relief Act extends the child tax credit of $1,000, maintains the married standard deduction amount to twice the standard deduction for single taxpayers and allows the 15% tax bracket end for married taxpayers to be twice the single taxpayer's amount. These changes are effective for tax years 2005 through 2010.

The act maintains the $58,000 alternative minimum tax exemption amount for 2005, which was scheduled to drop to $45,000. And it also uniformly defines qualifying child for purposes of the dependency exemption, the child credit, the earned income credit, the dependent care credit and head of household filing status.

If you have been claiming any of these credits or head of household status, you should consult your tax adviser to determine the effects on your personal tax situation.

The legislation also extends the research credit, the work opportunity tax credit and welfare-to-work credit for amounts paid or incurred through Dec. 31, 2005. And it extends the tax donation for qualified computer technology and equipment made by C corporations to educational organizations or public libraries until the end of 2005.

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