The 2004 tax acts: answers to your questions.

• Author: Nichols, E. Lynn

The Working Families Tax Relief Act of 2004 (FAMILIES) and the American Jobs Creation Act of 2004 (JOBS) made major changes in the tax law. Some of those changes simply extended old rules, others brought back relics from the past, and still others are entirely new concepts.

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The scope of the changes have led to many questions--and not too many easy answers. To help readers understand the tax law changes, we've turned to popular CPE instructor Lynn Nichols for help in answering the questions most often asked in CPE programs about the new tax laws.

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Is the value of an auto, boat, or airplane given to charity still tax deductible?

Yes, but the rules are different for contributions after 2004. Unless the charity makes significant use of the item in conducting its activities, or makes significant improvements before disposing of it, the donor's deduction is limited to the amount for which the charity sells the item. The new law also requires that the charity report, to the IRS and to the donor, the amount received from disposition of the item.

For the sales tax deduction, is there a minimum dollar amount to qualify as a major purchase?

IRS Publication 600 defines major purchases as motor vehicles, boats, airplanes and materials to remodel or build a house.

If you elect to deduct sales tax, can you pro-rate between two different states if you move within the year? What methods are available for allocation?

IRS Publication 600 allows taxpayers to pro-rate income based on period of residence, and then apply the tax tables for each state to that state's portion of the income. There is no provision to pro-rate based on income earned in the states.

Do expenses incurred to home-school children qualify for the $250 educator expense adjustment?

No. Code Section 62(d)(1) defines "eligible educator" and it's difficult to see how a home schooler could qualify. However, you might want to check with one of the home schooling associations that may have secured a private ruling on that issue.

How does the $25,000 SUV limit under IRC [section]179 interact with the $50,000 or $30,000 bonus depreciation?

Section 179 deduction is claimed first, then bonus depreciation is applied to the balance. A Section 179 deduction continues to be available after Dec. 31, 2004; bonus depreciation does not.

How will the Qualified Domestic Production Deduction (QDPD) apply to pass-through entities?

In the case of an S Corporation, partnership...