What’s New for Virginia Tax Returns

Standard Deduction: Beginning in 2005 the standard deduction for married individuals filing jointly increases from $5,000 to $6,000 ($3,000 for married filing separately).

Filing Threshold: For 2005, the filing threshold increases from $5,000 to $7,000 for individuals filing as single or married filing separately and from $8,000 to $14,000 for married couples filing jointly.

Extension for Filing Income Tax Returns: Taxpayers are granted an automatic six-month extension for filing an income tax return. No application for extension is required; however, any tentative tax due must be paid with a special voucher, Form 760IP, by the original due date for filing the return (May 1, 2006 for calendar year filers). The penalty for underpayment of tentative tax has increased to 2% per month.

Personal Exemption Amounts Increase: The personal exemption amounts for filers, spouses and dependents have been increased to $900 per exemption effective for taxable year 2005. The change does not affect the amounts for exemptions claimed for age (over 65) and blindness, which remain at $800 per exemption.

Voluntary Contributions: For 2005 there is a new voluntary contribution: Governor’s Office of Commonwealth Preparedness. In addition, new Public School Foundations are eligible to receive voluntary contributions.

Advancement of Virginia’s Fixed Date Conformity with the Internal Revenue Code: Virginia’s date of conformity to the Internal Revenue Code (IRC) has been advanced from December 31, 2003 to January 7, 2005.

Neighborhood Assistance Act Tax Credit: The maximum annual amount allowable per individual has increased from $750 to $50,000. The $8 million annual limitation on total credits available remains unchanged.

Major Business Facility Tax Credit: All Major Business applications (Form 304) must be submitted to the Department of Taxation 90 days prior to the due date of the return. For businesses in severely economically distressed areas whose credit year is in 2005 the due date is April 1, 2006. Form 304 is no longer part of the Income Tax Return. This credit requires certification from the Tax Credit Unit to be claimed on the tax return. A letter is sent to certify the credit and this letter must be attached to the return.

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.