Six Must-Know Tax Updates

Before that big April 15 deadline arrives, check these tax-news tidbits that could impact you. You’ll find some changes related to real estate, self-employment and more – including several laws that went into effect on October 22, 2004, with enactment of the American Jobs Creation Act. PLUS: Discover resources where you can turn for in-depth advice before you file.

The Like-Kind Exchange Exclusion
Anyone purchasing a residence using funds from a like-kind exchange must now hold onto that new property for at least five years before being allowed to utilize the $500,000 exclusion, according to a National Association of Realtors® (NAR) news update. Special note: The Internal Revenue Service (IRS) is adjusting some timing requirements for like-kind exchanges involving property in regions declared disaster areas by the president in 2004.

Business Real Estate Depreciation Accelerates
IRS guidelines related to ownership of business real estate are now more receptive to accelerated depreciation of buildings that are already built or are now being built. According to Entrepreneur® magazine, the guidelines state that any components classified as personal property can now be depreciated on an accelerated basis and qualify for a five-, seven- or 15- year write-off period instead of the former 39 years for building and acquisition costs. Accelerating the tax deduction now, rather than waiting, may increase business cash flow and yield a greater actual value.

The SUV Loophole Narrows
If you’re self-employed and purchased an SUV for business use in 2004, your deduction is now limited to $25,000 rather than the previous $100,000 ceiling, according to the NAR update. The rule, which went into effect on October 22, 2004, applies to vehicles classified as 14,000 pounds gross vehicle weight or less.

An Option for Tsunami Relief Donations
If you donated money to charity for tsunami relief by January 31, 2005, Money® magazine reports that you have the option to take the write-off on your 2004 taxes. Or, if you prefer, you can wait and take the deduction on your 2005 taxes.

Up Ahead: A Difference in Vehicle Donations
NAR also reported that if you donate a vehicle to charity after December 31, 2004, and you expect the value of your deduction to exceed $500, you’ll need to obtain a qualified appraisal on the vehicle. And, if the charity receiving your car sells it, your deduction can be no larger than the amount the car sells for. Special note: If you donated a car to charity in 2004, you can still deduct the full fair-market value on your 2004 taxes.

And Remember…
You can still make contributions to your IRA through April 15, 2005, while enjoying the deduction on your 2004 taxes.

Learn More Online
Consult your tax advisor for specific information on the above.
For general insight online checkout Fairmark Press, Inc., or the
Internal Revenue Service.

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