New Tax Rules for 2005

This year you can sock away more in your IRA and 401(k), but watch that deduction for a car donated to charity.

By Marc Myers

From Reader's Digest

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This year you can sock away more in your IRA and 401(k), but watch that deduction for a car donated to charity:

Your IRA
You can contribute up to $4,000 to a traditional or Roth IRA up until April 17, 2006 -- or $4,500 if you are age 50 or older. Set aside $66.66 a week (or $75 a week for those over 50) and hit the max by next April, says Ernst & Young's Martin Nissenbaum.

Your 401(k)
This year's maximum contribution jumps to $14,000 -- or $18,000 for people 50 and older.

Your Car
If you donate a car worth more than $500 to charity, the charity now must tell you in a letter what it plans to do with the vehicle. If the charity winds up keeping the car for its own use, you can deduct the car's fair-market value. But if the charity sells the car, you only can deduct what the charity receives, which could be much less. "You must receive the charity's letter within 30 days of a sale or, if the charity decides to keep the car, within 30 days of your contribution," says Nissenbaum.