TAX ADVICE from Julian Block
tax advisor and Larchmont neighbor, Julian Block, provides
help for Gazette readers
IMPORTANT TAX CHANGES FOR 2004
There have been lots of changes in the tax rules, many mandated
by indexing: that is, annual upward adjustments to provide relief
from inflation, as determined by increases in the Consumer Price
Index. What follows are the highlights of several changes that
might affect you.
PERSONAL EXEMPTIONS You get a bigger break
just for being you. Exemptions are worth $3,100 for 2004,
up slightly from $3,050 for 2003.
REDUCTIONS OF EXEMPTIONS For upper-incomers
with AGIs (short for adjusted gross income, the figure on
the last line of page one of Form 1040) above certain levels,
the deductions for all exemptions -- including those for a
spouse and dependents -- gradually decline. For 2004, the
exemption phase-out starts when AGI exceeds $142,700 for singles,
up from 2003's $139,500; $214,050 for joint filers, up from
$209,250; $178,350 for heads of household, up from $174,400;
and $107,025 for marrieds filing separately, up from $104,625.
PARTIAL DISALLOWANCE OF ITEMIZED DEDUCTIONS
Most itemized deductibles have to be reduced by 3 percent
of the amount by which your AGI exceeds a specified amount
-- $142,700 for 2004, up from $139,500 for 2003. Stated differently,
you forfeit $30 in total 2004 deductions for every $1,000
of AGI above $142,700 if you are single or filing jointly.
The $142,700 figure drops to $71,350 if you are married and
file a separate return; going on that path does not increase
the threshold for a couple to a combined $285,400.
STANDARD DEDUCTIONS The standard deduction
is the no-questions-asked amount that is automatically available
without having to itemize for such expenditures as charitable
donations and real estate taxes. Just how much of a standard
deduction you get depends on your filing status and age.
The normal standard deductions are $9,700 for joint filers;
$4,850 for marrieds filing separately and singles; and $7,150
for heads of household.
EXTRA-LARGE STANDARD DEDUCTIONS FOR THE ELDERLY AND
BLIND For those individuals who are at least 65 by
the close of the 2004 tax year, the standard deduction rises
by $950 for a married person (whether filing jointly or separately)
and $1,200 for an unmarried person. Persons who are considered
blind are entitled to those additional amounts or double those
amounts if they are both 65 and blind.
There are special rules that lessen the deduction amounts
allowed individuals (children, mostly, or elderly parents)
who can be claimed as dependents on the returns of other people.
The standard deduction can be as little as $800.
Copyright 2004 Julian Block. All rights reserved.
Julian Block is a syndicated columnist, attorney
and former IRS investigator who has been cited by the
New York Times as “a leading tax professional”
and by the Wall Street Journal as an “accomplished
writer on taxes.” His “Year Round Tax Savings”
covers key changes introduced by the 2003 tax act, shows
how to save truly big money on taxes – legally
– and explains the steps you should take to reduce
taxes for this year and even gain a head start for future
Send $9.95 for an e-mailed copy or $14.95 (in the U.S.)
for a postpaid copy to: J. Block, 3 Washington Square,
#1-G, Larchmont, NY 10538-2032. He can be contacted
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