SUV Loophole Closed.

Until October 22, 2004 tax profit planning for businesses was as simple as “Go and buy a Hummer or two.” Then you could expense them up to $100,000. This step was so common that it was widely reported on the internet that some of the luxury SUV makers “added” a few extra parts to get to the 6,001 lbs of gross vehicle weight required to get the deduction.

This is no more. So be careful if anyone suggests that you buy a large SUV and expense it.

Max out your 401(k)!

The end of the year is fast approaching, and of you are on a bi weekly payroll, then you likely only have 4 payroll checks left. How can you keep more of them? By giving them up of course! If you are covered by an employer sponsored retirement plan, many employers will allow you to make a one time deposit to your account. Depending whether you are covered by a Simple IRA, 401(k), or another type of plan there are limits to your total contributions but an extra deposit can go a long way to juice up your retirement savings. Most employers offer a match on some percentage of your contributions, so at the very least take advantage of the free money your employer is offering.

You have until April 15, 2005 to contribute to your personal IRA account, but you have to act now to get the benefits of your company sponsored retirement plan.

Teachers...Would You Like $250?

Are you a teacher? If you are, great! I can’t think of a better profession. Unfortunately, in our society a healthy wage does not come with this noble profession. On top of that, state budget gloom has led to cuts in funding for schools.

Some teachers though have felt the responsibility to use some of their own funds to help purchase supplies needed to make the classroom environment better. To these teachers the IRS would like to say “thank you.” They will express their appreciation by offering you an adjustment to income of up to $250.00.

This is not a truckload of money by any stretch of the imagination, but if you’re a teacher, you deserve it.

The IRS wants to help you buy a car.

New legislation enacted for this year, will enable taxpayers to continue to claim an adjustment to income up to $2,000. So if you purchase a NEW hybrid vehicle the government will help you buy it.

Qualifying Vehicles

• 2004, 2005 Toyota Prius
• 2004 Honda Insight
• 2004 Honda Civic Hybrid

You will notice that neither Honda has been certified for 2005, but I can’t think of any reason why the IRS will not certify them in the near future.

The hybrid cars cost considerably more than their gas guzzling counterparts, but with gas over $2.00 a gallon, 60 miles to the gallon is worth something.

NOTE: Just remember that a $2,000 adjustment is only worth roughly $500 in the 25% tax bracket.

Welcome!

It is hard to believe that the end of the year is already upon us. This unfortunately means that we also have to think about filing our taxes. I hope that this will be a place were taxpayers and tax professionals will be able to meet and discuss year-end tax planning for the next month or so. Then as we get into the New Year we can tackle some of the technical tax issues that we will be facing as we start to fill out the forms. Over the next month I will be posting (in plain English) some of the changes that our tax code has taken over the past year, and how it will affect the average taxpayer. So stay tuned more.