Tax-filing time is upon us, and itpays (literally!) to keep up on the latest tax law changes.
Specifically, here are five recentchanges to keep in mind while filing your 2005 tax returns:
1. The limits on contributions todefined contribution pension plans increased to $42,000 for 2005. Even if youdid not put money into a pension plan during 2005, you may be able to put inthe money in 2006 and receive a 2005 deduction. The $42,000 maximum deductionis scheduled to increase to $44,000 in 2006.
2. The maximum amount that can bededucted for a 401K increased to $14,000 in 2005 and to $15,000 for 2006deductions. For those taxpayers over 50 years old, an additional $4,000 in 2005and $5,000 in 2006 may be deducted.
3. IRA contributions for 2005 haveincreased to $4,000.
4. Qualified leaseholdimprovements to a commercial property placed in service during 2005, which werepreviously deductible over a period of 39.5 years, may be deducted over 15years, thus providing a faster tax benefit and more cash flow in your pocket.
5. The gift tax exclusion of$11,000 in 2005 will increase to $12,000 in 2006. These gifts can be in cash oran interest in a business of equivalent value. When implemented properly,gifting assets to family members in a lower tax bracket can reduce current andfuture taxes. It is also an effective estate-planning tool.
When implemented properly, thesecan be very effective tax planning tools. However, always first consult with aqualified tax advisor before making any tax-related decisions