What’s New for 2005 Returns

Vehicle Expense - Standard Mileage Rate. You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. For 2005, the standard mileage rate for the cost of operating your car for business use is 40 1/2 cents per mile for the period January 1 through August 31, 2005, and 48 1/2 cents a mile for the period September 1 through December 31, 2005. For computing deductible medical or moving expenses the rate is 15 cents per mile, up from 14 cents a mile in 2004. For providing services to a charitable organization the rate is 14 cents a mile.

Uniform Definition of a Qualifying Child. 

Beginning in 2005, one definition of a “qualifying child” will apply for each of the following tax benefits:  dependency exemption, head of household filing status, earned income credit (EIC), child tax credit and credit for child and dependent care expenses. In general, all four of the following tests must be met to claim someone as a qualifying child.

Relationship test. The child must be your child (including an adopted child, stepchild, or eligible foster child), brother, sister, stepbrother, stepsister, or a descendent of one of these relatives. An adopted child includes a child lawfully placed with you for legal adoption even if the adoption is not final. An eligible foster child is any child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

Residency test. The child must live with you for more than half of the year. Temporary absences for special circumstances, such as for school, vacation, medical care, military service, or detention in a juvenile facility count as time lived at home. A child who was born or died during the year is considered to have lived with you for the entire year if your home was the child’s home for the entire time he or she was alive during the year.

Age test. The child must be under a certain age (depending on the tax benefit) to be your qualifying child.

Continued next week

This column is offered as a public service with the understanding that each person's tax situation is different; and that you should consult your CPA before taking any action based upon comments made in this article. Call me and I will be happy to explain my CPA Quality tax preparation at “H&R Block Rates”.  I can be reached at 825-2771.