YEAR 2005 - CHANGES
		Year 2004	Year 2005
1. Health insuarance premiums:
Self Employed-Deductible		100%	100%
2. Section 179 Expense Election:
Maximum deduction limited to taxable income from trade or business		$102,000	$105,000
Reduction if cost of Section 179 property exceeds		$410,000	$420,000
(a) $35,000 is added to above figures for qualifying property used in the New York City Liberty Zone purchased and placed in servise after September 10, 2001.
3. Standard Milege rates:
Business travel		37.5cents	40.5cents
Medical/moving		14cents	15cents
Charitable use		14cents	14cents
4. Standard deduction:
Joint return		$9,700	$10,000
Head of household		$7,150	$7,300
Single		$4,850	$5,000
(a) Dependent-Greater of $800 or earned income plus $250 of unearned income, up to single maximum of:		$4,850	$5,000
(b)          Aged 65 or older, or legally blind:
Add - Single		$1,200	$1,250
- if married filling joint		$950	$1,000
5. Personal exemptions:		$3,100	$3,200
6. Cap on Social Security Wage Base
6.2% of wage based for FICA		$87,900	$90,000
7. Phaseout of itemized deductions
(other than medical, investment interest and casualty, theft and wagering loss)
3% of AGI in axcess of:		$142,700	$145,950
8. Personal Exemption Phaseout -
AGI beginning at: Joint		$214,050	$218,950
Head of household		$178,350	$182,450
Single		$142,700	$145,950
(a) Redused by 2% for each $2,500 or fraction thereof by which AGI exceeds above amounts
Fully Phase Out-
AGI above: Joint		$336,550	$341,450
Head of household		$300,850	$304,950
Single		$265,200	$268,450
9. Gift Tax Exemption		$11,000	$11,000
10. Transportation Fringe Benefits:
(a) Employer provided transit passes-
Emploee can exclude per month from gross income		$100	$105
(b) Employer provided parking-on or near premises of employer, or near a location from which the emploee commutes to work by mass transit		$195	$200
11. Childs Tax Credit for a dependent:
Less: Than 17 years old at close of tax year Redused by $50 for each $1,000 or fraction thereof AGI above $110,000 joint, or $75,000 single		$1,000	$1,000
Credit is refundable to extend of 15% taxpayer's earned income over		$10,750	$11,000
(Nontaxable combat pay can be treated as earned income)
A refundable credit is also available for low-income families with 3 or more children where social security taxes exceed the earned income credit.
12. U.S citizens working in a foreign country can exlude foreign earned income up to:		$80,000	$80,000
13. Higher education expense deduction for AGI:
Individuals with AGI up to $65,000, and joint filers with AGI up to $130,000 can deduct for AGI up to:		$4,000	$4,000
Individuals with AGI above $65,000 but under $80,000 and joint filers with AGI above $130,000 but under $160,000 up to :		$2,000	$2,000
The deduction cannot be taken for any individual for whom the Hope or Lifetime Learning Cretids are claimed.
(a)    The Hope Credit can be claimed for the first two years of undergraduate education when enrolled on at list a half- time basis in a program leading to a degree or certificate. The credit is available for each eligible student .
(i) Credit is 100% of the first $1,000 of college tuition expenses and 50% of the second $1,000 for a maximum of $1,500.
(ii) Credit available for tuition paid in one year for an academic period that begins no later than January, February or March of the following year.
(iii) At the following of the tax year the student must not have completed the first 2 years of postsecondary education. In addition the student must not have been convicted of any felony class drug affense.
(b)   The Lifetime Learning Credit is available per taxpayer for any year of undergraduate and graduate enrollment and even for one course of study.
(i) Credit is 20% of college tuition expenses up to :		$10,000	$10,000
(c) Both have a phaseout Range:
Joint AGI		$85,000 - $105,000	$87,000 - $105,000
Single AGI		$42,000 - $52,000	$43,000 - $53,000
14. Interest on education loans-maximum		$2,500	$2,500
Reduced when AGI exceeds:		Single:
		$50,000	$50,000
		joint:
		$10,0000	$135,000
Eliminated when AGI is:		$65,000	$65,000
15. Coverdell Education Savings Account: (CESA)
(a) Maximum annual contribution is:		$2,000	$2,000
For a designated beneficiary under age 18; must distribute account after age 30. Earnings are tax free if used for public, private, and religious elementary, secondary school, and college! No deduction for contributions.
(b) Phaseout
-AGI Between		single:
		$95,000 - $11,0000	$95,000 - $110,000
		joint:
		$190,000 - $220,000	$190,000 - $220,000
(c) Can set up a 529 plan for same beneficiary in same tax year.
16. Deducting state and local sales taxes in lieu of deduction for state and local income taxes.		Available	Available
17. Avoidance of penalties for Underestimation of Estimated Tax paid
(a) No penalty if tax liability for year, after credit for tax withheld is less than $1,000.
(b) No penalty if tax liability for prior year is zero.
(c) No penalty if estimated and withheld taxes paid is at least 90% of currents year's tax or 100% of prior year , unless the 90% of currents year's tax or 100% of prior year , unless the prior year's AGI in excess of $150,000 - in which case:
(i) if prior year is 2004 prior year's safe harbor percentage is 110%.
18. Dependent Care Credit - A taxpayer who maintains a house hold for one or more qualifying individuals, (depedent under age 13, or one physically or mentally incapable of caring for himself), and who pays child or dependent care expenses to enable him to be gainfully employed;(use Form 2441).
Taxpayers with AGI of $15,000 or less, credit is		35%	35%
When AGI over $43,000 credit is reduced to		20%	20%
Maximum for credit
-one qualified individual		$3,000	$3,000
-two or more		$6,000	$6,000
-Credit not available for costs paid to a dependent of taxpayer, or to taxpayer's child under age 19. However, payments to relatives (i.e., parents), who are not dependents, will qualify.
-Credit limited on joint return to earned income of lower earning spouse unless spouse is a full-time student (5 calendar months) in which case earned income is assumed to be $250 per month if one qualifying individual, and $500 per month if two or more.
19. Conributions to Traditional IRAs - Individuals, must be under age 70.5, and have earned income (other than deferred compensation). Contributions can be made up to due date of the tax return.
- Maximum contribution		$3,000	$4,000
- If taxpayer age 50 or over		$3,500	$4,500
Phase-out for joint filers if taxpayer covered by an employer's retirement plan.		AGI between	AGI between
		$65,000 - $75,000	$70,000 - $80,000
Individual who is not an active participant in an employer's retirement plan, but whose spouse is - phase out if:		AGI between	AGI between
		$150,000 - $160,000	$150,000 - $160,000
Designated beneficiary is determined as of September 30 of year following year of owner's death.
20. Conributions to Roth IRAs - Individuals can be over age 70.5
-Maximum contribution (to all IRAs)		$3,000	$4,000
-If taxpayer age 50 or over (to all IRAs)		$3,500	$4,500
Above maximum do not include rollover contributions from a traditional IRA to a Roth IRA
Contructions phase out for single tax AGI between		{$95,000 -$110,000}	{$95,000 -$110,000}
Joint filers with AGI between		{$150,000 -$160,000}	{$150,000 -$160,000}
Married filing separately with AGI between		$0 - $10,000	$0 - $10,000
(i) For above phase out AGI does not include income reperted from the conversation of a traditional IRA into a Roth IRA.
(ii) To convert from traditional IRA into a Roth IRA the taxpayer's AGI may not exceed $100,000 and the taxpayer if married, may not file separately. Although the converted amount must be included in gross income it is not counted in determining the $100,000 AGI limit.
(iii) Unlike traditional IRAs, the contribution limits apply whether or not taxpayer is an active participant in an employer maintained retirement plan.
Qualified distribution of Roth IRAs are not subjected to any tax . A qualified distribution is:
(a) One made after a 5 year holding period, beginning with the first year for which the taxpayer made a contribution to a Roth IRA, and ,
(b) Made after attaining age 59.5, or at or after death to a beneficiary, or for a first time home purchase.
22. Passive Losses from Rental of Real Estate
Up to $25,000 may be deducted in full against nonpassive income, if taxpayer or taxpayer's spouse, actively participates (i.e., makes management decisions) in the rental real estate activity, and has at least 10% interest in real estate activity.		$25,000	$25,000
The $25,000 maximum is reducted by 50% of the amount by which taxpayer's AGI for the year exceeds $100,000 and is completely phase out when AGI reaches $150,000. AGI is calculated without regard ta IRA contributions and taxable social security benefits.
23. Teacher's Classroom Expenses
Up to $250 per year for teacher's classroom expenses can be claimed for AGI for unreimbursed expenses incurred to purchase books, supplies, etc. used in classroom.		$250	$250