Winston, Williams, Creech, Evans & Company, L.L.P.
Certified Public Accountants

Tax Topics For 2005

Personal Exemption:  The deduction for each personal exemption for 2005 is $3,200, up from $3,100 in 2004.  This deduction is phased out as the taxpayer’s adjusted gross income exceeds the following threshold amounts:

The personal exemption amount is reduced by 2 percent for each $2,500 (or fraction thereof) by which the taxpayer’s adjusted gross income exceeds the applicable amount.

                         Filing Status                                                  Amount

                        Single                                                               $145,950

                        Head of Household                                          $182,450

Joint Return                                                      $218,950

                        Married, filing separately                                   $109,475

Standard Deduction for 2005: 

                        Filing Status                                                   Amount

Single                                                               $ 5,000

                        Head of Household                                           $ 7,300

Joint Return                                                      $10,000

                        Married, filing separately                                   $ 5,000

 Additional Standard Deductions:  (age 65 or older or blind)  

                        Single                                                               $1,250

                        Married/widow(er)                                           $1,000

Standard Deduction for Dependents:

                        The greater of $800 or $250 plus the amount of earned income, not to exceed $5,000.

Filing Requirements for Individuals for 2005:

                        Note:  Self-employed persons with net earnings of $400 or more are required to file a return

                                   regardless of the amount of the gross income.

                        Filing and Marital Status, Age                      Amount

                        Single, under 65                                               $ 8,200

                        Single, 65 or older                                            $ 9,450

                        Head of Household, under 65                           $10,500

                        Head of Household, 65 or older                       $11,750

                        Married, joint return                                         $16,400

                        Married, joint return, one 65 or older                $17,400

                        Married, joint return, both over 65                    $18,400

                        Married, filing separately                                   $ 5,000

                        Qualifying widow(er), under 65                         $13,200

                        Qualifying widow(er), 65 or older                     $14,200

Social Security Wage Base for 2005:  $93,000 base at 6.2% for employees & employers

Taxation of Social Security Benefits:

                        For single taxpayers with provisional income between $25,000 and $34,000,

                        50 percent of the benefits are taxable.  (Provisional income is modified AGI

                        plus half the taxpayer’s social security.)  For married persons filing jointly,

                        the range is $32,000 to $44,000.

                        For single taxpayers with provisional income above $34,000 and married

                        taxpayers filing jointly with provisional income above $44,000, up to 85%

                        of social security benefits may be taxable.

Self-Employment Tax Rate:  remains unchanged at 15.3%

Earned Income Credit:

                        For 2005, the earned income credit (EIC) is available to workers with qualifying

                        children and for childless workers.  Beginning in 2002 taxpayers will use AGI

                        to qualify, not Modified Adjusted Gross Income.  Furthermore, taxpayers have

                        two schedules for the credit, one for filing Married Filing a Joint Return and

                        a second for filing Not Married.

                        è Claiming the EIC as Married Filing a Joint Return, a taxpayer must:

                        a.  Have earned income, such as wages and self-employment income, of under

                             $32,338 if the taxpayers have one qualifying child or under $36,458 if they

                             have two or more qualifying children.

                        b.  Have a qualifying child who lived in his/her main home in the United States

                             for more than six months of the year.

                        c.  May file without a qualifying child if earned income is under $13,490.

è Claiming the EIC Not as Married Filing a Joint Return, a taxpayer must:

                        a.  Have earned income, such as wages and self-employment income, of under

                             $31,338  if the taxpayers have one qualifying child or under $35,458 if they

                             have two or more qualifying children.

                        b.  Have his/her main home in the United States for more than six months of the year.

                        c.  May file without a qualifying child if earned income is under $12,490.

                        d.  NOT be a qualifying child of another taxpayer and NOT be a dependent of another taxpayer.

                        e.  Be at least 25 but under 65 years old.  If filing jointly, one spouse must satisfy the age test.

Standard Mileage Rate(s):         

                        Business:                

                        The standard mileage rate for Jan-Aug 2005 is 40.5 cents per mile.

                        The standard mileage rate for Sep-Dec 2005 is 48.5 cents per mile.

                        The standard mileage rate for 2006 is 44.5 cents per mile.

                        Medical:

                        The standard rate for medical mileage is .15 cents per mile for 2005.

                        Charity:

                        The standard rate for charitable mileage is .14 cents per mile for 2005.