600 Ericksen Avenue NE, Suite 300, Bainbridge Island, WA 98110
Telephone: (206) 842-8951 Fax: (206) 855-9483 The Working Families Tax Relief Act of 2004
For the fourth time in four years Congress has enacted some big tax cuts. The new law provides tax relief to individuals and to businesses. Businesses especially should note that the title of the new law -- the Working Families Tax Relief Act of 2004 -- is misleading.
Tax relief for individuals Here are the big changes for most individual taxpayers:
--Parents of children under 17 can continue to claim a $1,000 child tax credit -- for every child through 2010. Without the new law, the child credit would have plummeted to $700 per child in 2005.
--Married taxpayers filing jointly will continue to benefit from full marriage penalty relief. Through 2010, joint filers pay tax at double the single rate for the 15 percent rate and for the standard deduction. For 2005, this means having the high end of the 15 percent tax bracket pegged at $59,400 (rather than at $53,450) if Congress hadn't passed the new law. The change in the new law in the standard deduction for married couples filing jointly is equally as dramatic -- $10,000 in 2005 instead of $8,700.
--The 10 percent tax bracket's upper limit for married taxpayers filing jointly stays at $14,000 ($14,600 inflation indexed) for 2005 rather than dropping to $12,000. For single taxpayers, it stays at $7,000 rather than dropping to $6,000.
--The alternative minimum tax (AMT) exemption amount remains at $42,250 for single individuals and $58,000 for married couples for one more year. Taxpayers can also use the personal nonrefundable credits against AMT liability for one more year.
Tax relief for businesses
The new law extends over 20 tax breaks for business taxpayers back to January 1, 2004 and forward to December 31, 2005. These tax breaks benefit almost every business.
Some of the more popular extensions apply to the research credit; work opportunity tax credit; welfare-to-work tax credit; qualified zone academy bonds; charitable contributions of computer technology and equipment used for educational purposes; classroom expenses of school teachers; expensing of environmental remediation costs; credit for electricity produced from certain renewable resources; suspension of the 100-percent-of-net-income limitation of percentage depletion; credit for qualified electric vehicles; deduction for qualified clean-fuel vehicle property; and Archer medical savings accounts.