Profit from the New Tax Law Changes

We read and hear about tax changes, some looming, some happening all year long, and there were major changes at the end of this October found in hundreds of pages of a new tax statute. But it’s not always clear: “Does this affect me or not?” As autumn rolls into winter, the drumbeat of worry becomes more insistent – in fact, sometimes a headache.

Some of what’s new in 2004 for individuals:

• Option to deduct state/local sales tax or income tax (this is great for residents of states without income taxes)
• Automobile donations – 2004 is last year to donate used cars before tougher rules kick in for you to prove the value of your claimed deduction
• Computer donations – extension of the enhanced deduction for contributions of qualified computers (and don’t ignore that “qualified” component)
• Civil rights tax relief – Attorneys’ fees and court costs for unlawful discrimination claims can be deducted above-the-line, that is, even if you do not itemize other deductions
• Improvements in child care credit – multiple considerations here: More people will now qualify for the credit based on the definition of “child”; The refundable portion of credit is raised from 10% to 15%;
  The continued maximum credit of $1,000 is continued, not phased down to $750.

For small businesses, a lot is changing:

• SUV “loophole” closed – from Oct. 22, 2004, $25,000 cap on first year write-off of SUV cost (6,000-14,000 pounds), but only until year-end can you get the bonus first year depreciation on top of the $25,000 write-off
• New $5,000 deductions for start-up and organizational expenses of new businesses
• Increased limit on first-year expensing of property placed in service before 2007

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