Some tax changes on your 2004 taxes aren't caused by changes in the tax code but result from adjustments for inflation or rising prices. They include:
STANDARD DEDUCTION increases to $9,700 for joint filers, up from $9,500 on your 2003 taxes, and to $4,850 for single filers and married couples filing separately, up from $4,750. Also, the additional standard deduction for those age 65 or older or who are blind is $950 for married taxpayers, for a total of $1,900 a couple, and $1,200 for singles. You have the choice between taking the standard deduction or itemizing your deductions, whichever option lowers your tax bill more.
PERSONAL EXEMPTION increases to $3,100 apiece for yourself, your spouse, and each qualified dependent, up from $3,050 each on your 2003 taxes.
ITEMIZED DEDUCTIONS: The income ceiling at which certain itemized deductions begin to be phased out rises to $145,950 from $142,700. If your Adjusted Gross Income exceeds $145,950, itemizations are cut by 3 percent of the excess.
TAX BRACKETS for income taxes are adjusted automatically for inflation. Couples filing jointly paid a 10 percent rate on the first $14,000 of taxable 2003 income after exemptions and deductions and 15 percent on taxable 2003 income between $14,001 and $56,800. For 2004 taxable income, the 10 percent rate applies to the first $14,300 and the 15 percent rate to the next $14,301 to $58,100.
Single filers will see the 10 percent rate apply to the first $7,150 of taxable income, up from $7,000 the year before. Their 15 percent rate runs from $7,151 to $29,050, up from a range of $7,001 to $28,400.
Higher brackets also have inflation adjustments.
KIDDIE TAX: Children under 14 years old with investment income will see the kiddie tax on stock dividends, interest and the like kick in at higher limits in 2004: The first $800 is tax-free, up from $750 in 2003. The next $800 is taxed at the child's rate, probably 10 percent, also up from $750. Amounts over $1,600 are taxed at the parents' rate. That level is up from $1,500 in 2003.
ADOPTION TAX CREDIT: The credit can be taken on expenses up to $10,630. That's $240 more than in 2003. The credit phases out for filers with Adjusted Gross Income between $159,450 and $199,450, an increase of $3,950.
MILEAGE RATE: The business mileage rate is 37.5 cents a mile for 2004. For medical, moving, and charitable travel, the rate is 14 cents a mile. In 2005, the business rate increases to 40.5 cents a mile to reflect the recent rise in gasoline prices. The medical and moving rate also increases to 15 cents a mile in 2005, while the charitable rate remains 14 cents a mile.