- The Tax Genie
Taxpayer Relief Act of 1997
Here's a quick synopsis of the recently
enacted tax bill:
Per Child Tax Credit
families with children under age 17.
credit in 1998; $500 credit in 1999 and thereafter.
mandatory deposit requirement.
refundable against payroll taxes through enhanced EIC.
(that's the Earned Income Credit)
phase-outs begin at $110,000 for couples; $75,000 for
Hope Scholarship (Years 1-2: 100% of first $1,000 of
tuition; 50% of second $1,000; Years 3-4: 20% of $5,000
prepaid tuition plans receive tax-free treatment; 10
percent penalty on amounts not used for tuition, books,
room and board.
IRAs - Contributions of up to $500 per child (income
limits begin at $95,000 for singles and $150,000 for
free withdrawals for education from retirement IRAs.
of employer provided education assistance for three
of section 501(c)(3) cap on bonds for new construction.
for computer donations to schools.
the cap for small issue bond to $10 million for school
the income limits on front loaded IRAs to $10,000 for
couples and $5,000 for singles in 1998, 2002, 2003, 2004
until current law thresholds are doubled to $50,000 for
singles and $80,000 for married couples.
a new back loaded IRA in which contributions are not tax
deductible, but withdrawals are tax-free if account is
held for at least five years and account holder is at
least age 59½. Income limits begin at $95,000 for
singles and $150,000 for married couples.
penalty free withdrawals for first time home purchase.
nonworking spouses to save full $2,000 annually in IRA
regardless of working spouses' pension plan (income
limits begin at $150,000).
top rate of 20% for investments held for at least 18
months (12 months if investment was sold before July 29,
18% rate for assets purchased after 2000 and held at
least five years.
top rate of 10% for 18 month assets and 8% for five year
assets for joint filers with incomes less than $41,200
$500,000 exclusion for home sales for joint filers,
$250,000 for single filers.
for sales after May 6, 1997.
and Gift Tax
farm/small business exclusion of $700,000 effective 1998
(total = $1.3 million).
credit phases up to $1 million by 2007 (family farm/small
businesses remain at $1.3 million).
the home office business deduction.
the phase in of the self-employed health insurance
from the depreciation provisions of the AMT (that's the
Alternative Minimum Tax) to promote economic growth and
job creation (conforms depreciation lives).
business exemption from AMT.
the current 10% ticket tax to 7.5% over three years (the
rate will be 9% in October 1997) and creates a flight
a $12 arrival and departure fee on international flights.
Taxes (included in the spending bill)
cent per pack increase in 2000 and 2001 (increasing
current tax to 34 cents per pack).
cent per pack increase in 2002 (bringing tax to 39 cents
included, was the deemed liquidation rule for C corporations
electing S status.
a lot included in this bill and we will be providing you with
more information as the year progresses. But if you have any
questions about the new law - or how it may affect you - call us