MILEAGE RATES

The IRS has recently changed the standard mileage rate for the last four months of 2005. The new rates in effect for September through December will be:

• 48.5 cents per mile for all business miles driven, up from 40.5 cents per mile in the first eight months of 2005;
• 22 cents per mile when computing deductible medical expenses, up from 15 cents per mile in the first eight months of 2005;
• 22 cents per mile when computing deductible moving expenses, up from 15 cents per mile in the first eight months of 2005; and
• 14 cents per mile when providing services to a charitable organization, the same as in 2004.

SOCIAL SECURITY TAX

The 2005 social security wage base will be $90,000, up from the 2004 wage base of $87,900. This means that the 6.2% for FICA tax will go up $130.20 for the employee and the matching amount paid by the employer. The medicare portion of 1.45% remains applicable to all wages without limit.

Self-employed taxpayers will pay 15.3% on the first $90,000 and 2.9% above that.

ELEMENTARY AND SECONDARY TEACHERS’ DEDUCTION

For those in the field of education, the teachers’ classroom expense deduction of $250. has been reinstated for 2004 and 2005. This above the line deduction is for unreimbursed out of pocket expenses incurred by teachers, principals, counselors and aides for classroom related expenses. Expenses of more than $250 are deductible as miscellaneous itemized deductions subject to the 2% adjusted gross income floor.

SALES TAXES OR STATE INCOME TAXES

Taxpayers who itemize their deductions can now elect to deduct state and local sales taxes instead of state and local income taxes. The amount of the deduction can be based on the actual sales taxes paid or by using the IRS prepared tables.

DONATING CAR, BOAT OR AIRPLANE AFTER 2004

Obtaining a deduction for donating your car, boat or airplane will be more difficult starting in 2005. For donation in excess of $500 taxpayers may no longer use the “Blue Book” value as the deduction is limited to the amount for which the charity later sells the vehicle. The charity must prepare within 30 days of sale and taxpayers must attach to their tax return, a statement identifying the vehicle and stating the amount for which it was sold. Failure to attach the statement will result in the disallowance of the deduction.

UNCLAIMED FEDERAL REFUNDS

The IRS is looking for over 87,000 taxpayers whose income tax refund checks totaling $73 million could not be delivered. If you think that you could be one of these taxpayers, go to the IRS website at IRS.gov and use the “Where’s My Refund?” tab to find out. Those without internet access should call the IRS toll free at 1-800-829-1040 and follow the prompts.