New Mileage Rates
Beginning 2005, the standard mileage rates for the use of a car are 40.5 cents a mile for all business mileage (up from 37.5 cents a mile in 2004); 15 cents a mile when computing deductible medical or moving expenses (up from 14 cents in 2004); and 14 cents a mile when giving services to a charitable organization.

Family Employment
Employment tax requirements for family members may vary from those for other employees.  Some of the differences are as follows

One spouse employed by another: Wages for services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding, Social Security, and Medicare taxes.  The wages are NOT subject to FUTA.

Child employed by parents: Payments for the service of a child under age 18 who works for his or her parent in a trade or business are not subject to Social Security and Medicare taxes if the trade or business is a sole proprietorship, or partnership in which each partner is a parent of the child.

Parent employed by child: The wages for services of parents employed by their children in a trade or business are subject to income tax withholding, Social Security, and Medicare taxes. They are NOT subject to FUTA taxes.

Social Security, Medicare, and FUTA do NOT apply if the parent is paid for a service that is not a trade or business, such as domestic service.  However, Social Security and Medicare taxes DO apply to domestic services if:

– the parent cares for a child who lives with a son or daughter and that child is under age 18, or a child that requires supervision for a minimum of 4 continuous weeks in a calendar quarter due to a medical or mental condition.

– the parent’s son or daughter is divorced, is a widow or widower, or is married to a person who, because of physical or mental condition, cannot care for the child during such period.  

Charitable Donations
Beginning in 2005, charitable donations of vehicles resulting in deductions of $500 or more are limited to the gross proceeds the charity receives from the sale of the vehicle.  The charitable organization must provide the donor with a written acknowledgment of the donation.

Corporations must now obtain an appraisal for charitable donations of property (other than cash, publicly traded securities, or inventory) whose value exceeds $5,000.  Individuals continue to have to meet this requirement.  In the case of corporations, the appraisal must be attached to the tax return if the appraised value exceeds $500,000.  Individuals must attach all appraisals to their tax returns.

There is a good donation value site on the Web at www.salvationarmysouth.org/valueguide.htm
There are numerous items listed, and you are given a range in values for each item.

The 6,000 lb SUV Tax Deduction
You may have heard that you can write off up to $100,000 of the cost of a luxury sport utility vehicle (SUV). Until recently, this was true. Small-business owners and the self-employed were allowed to expense as much as $100,000 (actually $102,000 for 2004, due to inflation adjustments) of the purchase price of heavy SUVs (those with a gross or loaded vehicle weight of over 6,000 pounds and built on a truck chassis). This created a huge incentive for anyone running their own business to buy heavy SUVs, thereby contributing to their popularity. The bad news, at least from a tax perspective, is that the recently passed American Jobs Creation Act of 2004 has narrowed the so-called SUVs loophole by rolling back the expense deduction to $25,000 for most purchases. And, unlike many tax changes which take effect at some time in the future, this change took effect for SUVs placed in service after Oct. 22, 2004 (the date the President signed the American Jobs Act into law), presumably to prevent people from rushing out to buy heavy SUVs before the tax break disappeared.

The good news, though, is that heavy SUVs are still treated favorably under the tax laws. The rules that limit the amount of annual depreciation that can be deducted on passenger automobiles do not apply to heavy SUVs (those with a gross or loaded vehicle weight of over 6,000 pounds and built on a truck chassis). Thus, heavy SUVs are eligible for regular depreciation allowances on top of the $25,000 that is allowed to be expensed.

For example, if you buy a $60,000 heavy SUV in 2005, on your tax return for the 2005 year, you'll be able to expense $25,000 and your first-year depreciation deduction will be $7,000 [($60,000 minus $25,000) x 20%]. That will yield you a total first-year write-off of $32,000. The remaining $28,000 will be recovered in 2006, and later under the general depreciation rules. This assumes you use the vehicle 100% for business.

So, as you can see, while Congress tightened up the SUV loophole, it by no means closed it entirely.

Here is a list of 38 eligible vehicles over 6,000 pounds:

BMW X5	Dodge Ram 1500	GMC Sierra
Cadillac Escalade	Dodge Ram 3500	GMC Sierra Denali
Chevy Astro	Ford Excursion	Land Rover Discovery
Chevy Avalanche	Ford Expedition	Land Rover Range Rover
Chevy Express	Ford Econoline E-150	Lincoln Blackwood
Chevy Silverado	Ford Econoline E-150	Lincoln Navigator
Chevy Suburban	Ford Econoline E-350	Mercedes ML 310
Chevy Tahoe	Ford F-150	Mercedes ML 500
Dodge Durango	Ford F-150	Mercedes ML55 AMG
Dodge Ram Van	Ford F-350	Toyota Land Cruiser
Dodge Ram Maxi Van	GMC Yukon	Toyota Sequoia
Dodge Ram Wagon	GMC Safari	Toyota Tundra
Dodge Ram 1500	GMC Savana	.

Tenants-In-Common
While not new, Tenants-In-Common (TIC), or fractional interest ownership in commercial real estate has become a very popular way to invest, especially as a way to handle a tax-free 1031 exchange.

As a Tenant-in-Common, you own a piece of a larger property (usually larger than you would be able to purchase alone), and you receive a pro-rata share of all revenues generated by the property.

Each owner in a TIC receives an individual deed for his percentage interest in the entire property. Investors are individual owners, not limited partners. Each owner has the same rights as would a single owner.

In March 2002, the IRS released Revenue Procedure 2002-22, which set forth the conditions and guidelines that allow a small group of single owners to invest in larger real estate projects. This cleared the way for 1031 exchanges into TIC properties

Unfortunately, we have found that there are some unscrupulous companies out there.  We have been seeing a great many of these TIC’s being sold by the same people who marketed those “Tax Shelters” in the ‘80s.  We urge you to carefully review the documentation before moving forward.  Since there are deadlines to meet in a tax free exchange, many of these salespeople prey on that fact and pressure people to commit before they really understand the terms.