Taxpayer Services Division
Federal Tax Changes And How They Affect 2004 Returns

Working Families Tax Relief Act of 2004 and the American Jobs Creation Act of 2004. Georgia has not currently adopted any of the provisions in these acts. These provisions include extension of the $250 deduction for teacher classroom expenses to 2004 and 2005, a 15 year recovery period for leasehold improvements, the option for individuals to deduct sales tax instead of income tax, etc. However, the Governor in a press release (available at http://www.gov.state.ga.us/press/2004/press600.aspx ) has indicated that he intends to introduce legislation in the General Assembly which will include a proposal that the $250 deduction for teacher classroom expenses be made retroactive to include the 2004 tax year.

 

If an individual deducts the sales tax on their federal return, they must subtract this from their itemized deductions.  However, they may add to their itemized deductions any Georgia income tax that was paid during the year.

 

Jobs and Growth Tax Relief Reconciliation Act of 2003 and Job Creation and Worker Assistance Act of 2002. Georgia has adopted the provisions of these acts (as they relate to the computation of Federal adjusted gross income and Federal taxable income) for taxable years beginning on or after January 1, 2004, except for I.R.C. Section 168(k) (30% and 50% bonus depreciation) and Section 1400L (tax benefits for the New York Liberty Zone) which are treated as if they are not in effect. Further, I.R.C. Section 179(b) is treated as it was in effect before enactment of the Jobs and Growth Tax Relief Reconciliation Act of 2003.

 

Depreciation Differences . Depreciation differences due to the Federal acts mentioned above should be handled in the following manner. If the taxpayer has depreciation differences that are attributable to both the 2002, 2003, and 2004 Federal acts, it is not necessary to make a separate adjustment for each act.

 

A. Depreciation must be computed one way for Federal purposes and another way for Georgia purposes. To compute depreciation for Federal purposes, taxpayers should use the 2004 IRS Form 4562 and attach it to the Georgia return.

 

B. Depreciation must also be computed for Georgia purposes. Taxpayers should use Georgia Form 4562 to compute depreciation for Georgia purposes and attach it to the Georgia return.

Please see the Georgia form instructions for more information including the specific line numbers where adjustments should be made.

All flow through entities (partnerships, S Corporations, limited liability companies, limited liability partnerships, and fiduciaries) that own property, do business in Georgia, or that have Georgia resident owners/beneficiaries should notify them of the required adjustments. Depreciation differences may also be reported to you by these types of entities.

 

Additionally, the provisions listed above may have an indirect effect on the calculation of Georgia taxable income. Adjustments from the items listed below should be added or subtracted on your Georgia income tax form.

  1. When property is sold, for which the bonus depreciation was claimed, there will be a difference in the gain or loss on the sale of the property.
  2. The depreciation adjustment may be different if the taxpayer is subject to the passive loss rules and is not able to claim the additional depreciation on the Federal return.
  3. Other Federal items that are computed based on Federal Adjusted Gross Income or Federal Taxable Income will have to be recomputed if the provisions of the Federal Acts are claimed. Some examples are itemized deductions, student loan interest deduction, self employed health insurance deductions, contributions, etc.

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