Tax-law changes offer breaks and burdens
Technically, the American Jobs Creation Act of
2004 is aimed at corporate tax concerns. But amid the new law's
633 pages and 274 tax code changes are some provisions that affect
individual and small business taxpayers.
First the good news -- at least for people in Texas,
Florida and five other states that have no income tax. State
sales taxes you pay will be tax deductible on your 2004 return,
due next April 15.
This isn't a totally new tax break. Before 1986 legislation
eliminated it, you could find such a sales-tax deduction on your
1040. In its newest incarnation, this tax bill will allow filers
to choose whether they want to deduct sales taxes they paid or state
income taxes that were collected.
This obviously is a boon to filers in the seven states
that have no state income tax, as well as Alaska. In that northernmost
state, some localities levy sales taxes, which residents now will
be able to claim.
Now the bad news.
Beginning in 2005, the rules on deducting
a car you donate to charity will be tougher. Lawmakers are concerned
about the millions the U.S. Treasury has lost because taxpayers
overstated the value of the vehicles they gave to nonprofit organizations.
And if you didn't buy a luxury
SUV for business use on or before Oct. 22, the day President
signed the bill into law, you're out of deduction luck. The new
law throws a major roadblock in this tax loophole. Now to get the
$100,000 write-off, the vehicle you purchase must weight more than
14,000 pounds. The deduction cap on Hummers and other gigantic sport
utility vehicles that weigh a mere 6,000 pounds are capped at $25,000.