What’s New in Taxes

New tax numbers are released for 2005

The IRS adjusts many tax numbers for inflation each year. Other numbers change as a result of tax law revision. As you begin your tax planning for 2005, here are some of the changes you’ll need to take into account.

The maximum earnings subject to social security tax increases to $90,000 for 2005. As before, all earned income (wages and self-employment income) is subject to Medicare tax. The earnings limit for retirees under age 65 increases to $12,000. There is no earnings limit for those 65 and older.
The top estate tax rate decreases to 47%, but the exemption amount stays at $1.5 million for 2005. The annual gift tax exclusion remains at $11,000 per donee.
The nanny tax threshold remains at $1,400 for 2005. If you pay household workers more than this amount during the year, you’re responsible for payroll taxes.
The kiddie tax threshold remains at $1,600. If your child under age 14 has more than $1,600 of unearned income in 2005 (e.g., dividends and interest income), the excess will be taxed at your highest rate.
The first-year business equipment expensing limit increases to $105,000. A new limit applies to sport utility vehicles: when purchased for business use, no more than $25,000 may be expensed in the first year.
The standard mileage rate for business driving increases to 40.5¢ per mile, and the mileage rate for medical and moving expenses increases to 15¢ a mile. The rate for charitable driving remains at 14¢ a mile.

For details or for assistance with your tax planning, give our office a call.