WORKING FAMILIES TAX ACT OF 2004
On October 4, 2004 President Bush signed into law the Working Families Tax Relief Act of 2004. This $146 billion package was aimed at the middle class, but it has something for everyone, including extending four major individual tax cuts that were set to expire and retroactively extending many business tax provisions.
What impact will this new tax law have on my 2004 tax return?
Probably no impact. Most of this tax law was extending benefits that were due to expire in 2005.
What major tax benefits were extended?
The $1,000 Child Tax Credit was extended through 2010
The expanded 10% tax bracket extended through 2010
Marriage Penalty Relief:
The expanded 15% tax bracket was extended through 2010
The marriage penalty scheduled to be phased in again between 2005-2009 was eliminated
Alternative Minimum Tax the exemption amount of $58,000 was extended one more year, through 2005.
Any impact at all on our 2004 tax return?
In 2002 and 2003, teachers (K-12) were able to deduct $250 of out-of-pocket classroom expenses. This benefit was extended for 2004 and 2005. However, this is no big deal. Teachers were always able to claim a charitable contribution for supplies donated to their school.
Contributions to Archer Medical Savings Accounts (MSAs) are also extended through 2004 and 2005.
COMPARISON OF IMPACT OF NEW LAW ON 2005 TAX RATES |
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Married Filing Jointly Tax Brackets |
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2005 with New Law |
2005 without New Law |
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2005 Taxable Income......Tax Rate |
2005 Taxable Income......Tax Rate |
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$0 14,600...........10% |
$0 12,000...........10% |
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$14,601 59,400...........15% |
$12,001 53,450...........15% |
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$59,401 119,950...........25% |
$53,451 119,950...........25% |
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$119,951 182,800...........28% |
$119,951 182,800...........28% |
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$182,801 326,450...........33% |
$182,801 326,450...........33% |
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Over $326,450................35% |
Over $326,450................35% |
Was there any tax relief for business?
The $14 billion business tax portion of this package generally extends tax breaks retroactively to when they expired through 2005. This includes:
R&D Tax Credit
Welfare-to-Work and Work Opportunity Tax Credits
Enhanced deduction for charitable contributions of qualified computers
Qualified electric and clean fuel vehicles deduction
Any losers in this tax bill?
No. The Working Families Tax Relief Act of 2004 provides some benefit to almost all taxpayers and doesnt raise taxes for anyone. However, there are other expiring tax laws that will need to be addressed soon. The Alternative Minimum Tax continues to be a problem for many people. The 15% and 5% capital gains tax rates and preferential dividend income rate are set to expire in 2009. After 2005, Section 179 business expensing limits are set to reverse back to $25,000 from $100,000 and bonus depreciation expires this year.
The results of the election will probably have a big impact on our taxes as well.
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This is only a brief outline and is not as a substitute for counseling on your particular tax situation. If you have any questions, please contact your personal advisor, or call us for clarification.
Arnow & Associates
4655 North Port Washington Road, Suite 300
Glendale, Wisconsin 53212
(414) 964-4000
(800) 964-4559
AGEN630 10/07/04