New Tax Laws

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Working Families Tax Relief Act of 2004
signed into law on October 4, 2004

1. $1,000 child tax credit extended through 2010
   
   
2. Elimination of the marriage penalty in the standard deduction and 15% tax bracket extended through 2010
   
   
3. Expanded 10% bracket extended through 2010
   
   
4. Higher alternative minimum tax exemptions extended through 2005
   
   
5. Research & Development Credit extended for amounts paid or incurred after June 30, 2004 and before 2006
   
   
6. Teacher's classroom expense deduction is extended for 2004 and 2005 ($250 above-the-line deduction)
   
   

American Jobs Creation Act of 2004
signed into law on October 23, 2004

1. Manufacturers deduction:
   • Effectively reduces the top corporate income tax rate on domestic manufacturers from 35% to 32%
   • Manufacturers are defined as:
     • Traditional Manufacturers
     • Construction
     • Engineering
     • Energy production
     • Computer Software
     • Films and video tape; and
     • Processing of Agricultural products
   • When fully phased in by 2010, the deduction will be equal to nine (9) percent of the lesser of:
     1. qualified production activities income for the year; OR
     2. taxable income for the year
   • The new deduction starts as a transition percentage of:
     • 3% for 2005 and 2006
     • 6% for 2007, 2008 and 2009
     • 9% for 2010 and thereafter
   • The deduction is limited to 50% of the W-2 wages paid by the taxpayer during the tax year
   • Corporations, individuals, S Corps, partnerships, estates and trusts can take advantage of the deduction
2. Expensing limits (section 179):
   • The higher limits in effect set to expire 12/31/04 are extended thru 2007. The threshold is indexed for inflation starting in 2004. It is $102,000 for 2004 with a $410,000 property cap.
3. SUV Deduction:
   • The expensing deduction for vehicles weighing not more than 14,000 pounds is capped at $25,000 effective for property placed into service after the date of enactment.
4. Depreciation:
   • Qualified leasehold improvements to nonresidential real property placed into service after date of enactment and before January 1, 2006 are depreciated over a 15 year straight line method. Previously, this was 39 years. A qualified leasehold improvement is an improvement to the interior of a building made by either the lessor or lessee and placed into service more than 3 years after the building was placed into service.
   • Qualified restaurant property placed into service after date of enactment and before January 1, 2006 are depreciated over a 15 year straight line method. Qualified restaurant property is a building improvement placed into service more than 3 years after the building is placed into service. The restaurant must use more than half of the buildings square footage.
5. S Corporations:
   • Permissible number of shareholders increases from 75 to 100
   • All members of a family will be treated as 1 member
6. State Sales Deduction:
   • For tax years beginning after 2003 and before 2006, individuals can elect to deduct state sales taxes instead of state and local income taxes via 2 options:
     1. Accumulation of receipts OR
     2. Tables to be prepared by the Secretary of the Treasury based upon average consumption and other factors

     Note that there are 9 states that currently do not impose personal income taxes on individuals

     1. Florida
     2. Alaska
     3. Texas
     4. Washington
     5. South Dakota
     6. Nevada
     7. Wyoming
     8. New Hampshire (tax interest and dividends only)
     9. Tennessee (tax interest and dividends only)
7. Vehicle Donations:
   • For donations of vehicles after December 31, 2004, the amount of the charitable deduction will depend upon how the charity uses the vehicle
   • If the charity sells the vehicle without the vehicle in any significant way, the amount of the charitable deduction cannot exceed the gross proceeds of the sale
   • If the charity uses the vehicle for its own use, the charity must provide acknowledgment as to the value which must be produced by the taxpayer

News Archive:
Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)