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2004 Working Families Tax Act As we approach the end of another busy year, it is time once again to spend the holidays with friends and family, express our thankfulness for our blessings, start planning for a wonderful new year…and start thinking about the close of the 2004 tax year. If you are either currently going through a divorce or have recently been divorced, you need to plan accordingly for your tax filing on April 15, 2005. Here are some of the changes to the tax laws resulting from the 2004 Working Families Tax Act passed by Congress this year. Child Tax Credit. The child tax credit will remain at $1,000 through the year 2010. The increase in the refundability of the child tax credit for low income families from 10% to 15% begins in 2004. Marriage Penalty Relief. The provision setting the standard deduction for joint filers at twice that of single filers has been extended through the year 2010 (instead of expiring in 2004). The provision increasing the size of the 15% rate bracket for married couples filing joint returns has also been extended through 2010 (instead of expiring in 2004). 10% Bracket. The 10% tax bracket for 2004 with inflation adjustments is $7,150 for singles and $14,300 for married couples filing jointly. Alternative Minimum Tax Relief. The higher Alternative Minimum Tax (“AMT”) exemption amounts have been extended through 2005 (instead of expiring and reverting to lower amounts in 2004). Availability of nonrefundable personal credits to offset AMT has been extended through 2005 (instead of expiring after the 2003 tax year). Military Families. The Act provides relief to low income military families in combat zones by (1) increasing the child credit by allowing inclusion of tax-free combat pay when calculating refundable child credit; and (2) increasing the earned income credit (“EIC”) in 2004 and 2005 by giving the option to include combat pay when calculating EIC. |
