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Release Notes for Version 6.17, released Nov 12, 2004
This release updates the tax calculations for the recently-passed Working Families Tax Relief Act of 2004, which was signed into law on October 4. It also adds the ability to specify a "start year" (such as 2005) for the calculations.
Changes to all editions on account of the Working Families Tax Relief Act of 2004:
The effect of this tax act is to slightly reduce federal income taxes for all taxpayers. The reductions will be most noticeable to people in the lower tax brackets (15% and below).
1. Revised the child credit to be $1,000 through 2010. It had been scheduled to be $700 through 2008, and $800 in 2009.
2. Accelerated to 2004 from 2005 the start of the 15% threshold (had been 10%) for the refundable portion of the child tax credit. This 15% is applied to the taxpayer's earned income in excess of $10,750 (with indexing).
3. Standard deduction. Increased the standard deduction to $5,000 (non-joint) / $10,000 (joint) for 2005. For 2006-2010, made the standard deduction for the joint filiing status be double that for the single filing status. (This eliminates the "marriage penalty" with respect to the standard deduction.)
4. Recalculated the standard deductions for 2006-2010 for all filing statuses, to be the inflation rate of 3.1% applied to 2005 standard deductions. (Standard deductions for 2011 and later are calculated by reference to 2002, not 2010, under existing law, and do not change.)
5. Tax brackets. Increased the 10% bracket for 2005 through 2010, to be the same as 2004, subject to indexing for inflation. The 10% breakpoint had been scheduled to drop back a bit from 2005 through 2010. More specifically, the 10% breakpoint had been scheduled to drop to $6,000 for single individuals, $10,000 for heads of households, and $12,000 for married filing joint taxpayers, for 2005 through 2007. For 2008, the 10% breakpoint had been scheduled to be $7,000 for single individuals, $10,000 for heads of household, and $14,000 for married filing joint taxpayers. They had been scheduled to be adjusted for inflation for 2009 and 2010. The 10% bracket was, and currently still is, scheduled to expire after 2010.
6. Tax brackets. The 15% tax bracket for married people is now double that for single people for 2005 through 2007. The previous tax act made this the case for 2008 through 2010. This eliminates the "marriage penalty" with respect to incomes in the 15% tax bracket.
7. Tax brackets. Updated the figuring of all tax brackets for 2005 through 2010 based on the latest inflation figures.
8. Alternative minimum tax. Extended the 2004 Alternative minimum tax exemption amount to apply in 2005 as well. For single or heads of household, this is $40,250. For joint filers, this is $58,000. After 2005, these numbers revert to $35,750 and $49,000 respectively. Higher exemptions mean less alternative minimum tax to pay.
9. Other tax updates. Updated inflation-adjusted figures such as Earned Income Credit phase-out levels, standard deductions, exemptions, exemption phase-outs, itemized deduction phase-outs, education credit phase-outs, child credit phase-outs, and Social Security threshold with final 2004 numbers from newly-released final IRS tax forms and instructions.
Enhancements to Professional Edition Only
1. Start Year. You may now specify a "Start Year" such as 2005. All non-dated items (such as wages) will commence in the "Start Year." All age-related items (e.g., retirement, IRA distributions, pension distributions, social security income) will occur in the appropriate calendar year.
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