Tax Tips From Michelle Biess, CPA (Tax Tip Archive)
December 1997
In 1997, Congress passed the most complicated piece of tax legislation in over a decade.
Significant aspects of the new tax provisions as they affect tax liabilities in 1997 and 1998 are provided here for your information.
There has been a decrease in the long-term capital gains tax rate from 28% to 20% (10% for taxpayers in the 15% tax bracket) with a longer required holding period of 18 months for transactions taking place after May 7, 1997
Up to $500,000 (for married persons filing jointly, otherwise $250,000) of the profit from the sale of your personal residence is tax-free for sales after May 7, 1997.
This law replaces the old home-sale rollover rules and the one-time $125,000 gain exclusion for home sellers age 55 and over.
The standard mileage rate for business travel has been increased to 31.5 cents per mile for 1997.
The rate for medical mileage remains at 10 cents per mile and charitable mileage increases to 14 cents per mile in 1998.
The deduction for health insurance payments for self-employed individuals has increased to 40% for 1997 and 45% in 1998.
For 1998, early distributions from an IRA can be made without the 10% penalty if the funds are used to pay higher education expenses.
In addition, withdrawals of up to $10,000 are permitted for qualified first-time home buyers.
The distribution is still subject to regular income tax.
In 1998, single parents with income under $75,000 and married couples with income under $110,000 will get a tax credit equal for $400 for each qualifying dependent child under 17.
These credits phase out above these income limits
In 1998, joint taxpayers with income under $160,000 and single taxpayers with income under $110,000 can invest in a new type of IRA called the Roth IRA.
There is no tax deduction for the IRA contribution but the funds and any earnings can be withdrawn tax-free after 5 years and reaching age 59 ½.
Regular IRAs can be converted to Roth IRAs by paying the tax on the balance converted over four years.
Once again, my office offers a full range of tax services including electronic filing of Federal income tax returns for 1997 with direct deposit of tax refunds.
For those taxpayers who wish to file paper returns, direct deposit of tax refunds is also available.
If you have questions about your tax situation or need assistance with tax planning, please call my office.
If you know of someone who could benefit from my services, please have them contact me.
Best wishes for a happy and prosperous New Year.
Sincerely,
Michelle M. Biess, CPA