What's New in Taxes
Add these items to your 2005 recordkeeping
Keeping good records helps you get every tax deduction to which you're entitled. This year there are some new rules; be sure your recordkeeping takes them into account.
* New rule #1. There's a new itemized deduction for state and local sales taxes on your federal income tax return. You can now choose to deduct sales taxes instead of state and local income taxes paid.
If you plan to purchase big ticket items this year, or if you are taxed in a state with no or low income tax, you should keep your sales tax receipts. Here's why: The IRS provides sales tax deduction tables which can be used instead of keeping receipts throughout the year, but you can add to the table amount sales taxes paid on big ticket items such as motor vehicles, airplanes, boats, homes, mobile homes, and home building materials. When you file your 2005 tax return, you can then choose to deduct either sales taxes or state and local income taxes, whichever gives you the bigger deduction.
* New rule #2. Teachers may deduct up to $250 for the classroom supplies they purchase with their own money. Again, keep receipts so you don't miss this tax break. It's a deduction that can be taken whether you itemize or take the standard deduction.
* New rule #3. If you donate a vehicle to a charity in 2005, you can no longer estimate the vehicle's fair market value to determine your deduction. You'll have to get the valuation amount from the charity, and if they sell your vehicle at auction (as most charities do), that amount is limited to the actual selling price of the vehicle.
For details or for assistance with your tax planning, give our office a call.