2005 Tax Planning Tips

• Medical expenses close to reaching the magic 7 1/2 % of adjusted gross income . Have any elective  medical costs paid in the 2005. For example : Order new glasses, contacts or other before year end. Pay for them when ordering. Credit card charges are considered a cash payment in the year charged.

• Planning on donating your vehicle,boat, or airplane in 2005 ? The deduction for charitable contributions of vehicles,etc. for which the claimed value  exceeds $500 depends upon the use of the vehicle by the donee organization. If the donee organization sells the vehicle without any significant intervening use  or material improvement of the vehicle by the organization, the deduction can not exceed the gross proceeds received from the sale.

• Starting in 2004 taxpayers have the option of deducting the sales and use taxes paid in lieu of the deduction for  state income tax. The IRS has issued Publication 600 "Optional State Sales Ta x Tables " for use in preparing 2004 returns.

• The so-called loophole for expensing  SUV's in the year purchased has been  narrowed commencing in 2005. If the gross vehicle weight is less than   14,000 lbs. the maximum amount that may be expensed for an suv with gross vehicle weight greater than 6,000 lbs. is $25,000.

• For 2005 the maximum elective deferral for a 401(k) plan is $14,000. Individuals who will reach their 50th birthday  on or before Dec 31,2005 , may defer an additional $4,000 of income  for a total of $18,000.