June 1999

INDIVIDUAL TAX LAW CHANGES THAT AFFECT 1999

The tax laws enacted in the last few years contain important new provisions that are effective for the first time in 1999. In addition, many established tax breaks are liberalized beginning in 1999. To inform you of what is new in the tax rules, here is a summary of the major individual tax changes for 1999. All of the new rules are effective on January 1, 1999, except as otherwise noted.

Personal Income Taxes

Increased child tax credit. Eligible individuals may claim a tax credit of $500 (was $400 last year) for each qualifying child under 17 (one for whom you can claim a dependency exemption and who is your child or other direct descendant or your eligible foster child). The credit begins to phase out when adjusted gross income as specially modified exceeds $110,000 for joint filers, or $75,000 for single filers and heads of households, and $55,000 for marrieds filing separately.

Boosted deduction for education loan interest. You can deduct up to $1,500 of interest paid on an education loan (was $1,000 last year), but the deduction phases out over $40,000 to $55,000 of adjusted gross income as specially modified ($60,000 and $75,000 on joint returns).

Higher estimated tax payments for some. Your estimated tax burden for 1999 may increase slightly if your adjusted gross income for 1998 was over $150,000 ($75,000 for marrieds filing separately). If you fall in this category, you will escape an estimated tax underpayment penalty for 1999 if your estimated tax payments for 1999 are at least equal to (1) 105% of the tax shown on your 1998 return, or (2) 90% of the tax shown on your 1999 return, whichever is less. For 1998, such taxpayers escaped an estimated tax penalty if their estimated tax payments for 1998 were at least equal to (1) 100% of the tax shown on their 1997 return, or (2) 90% of the tax shown on their 1998 return, whichever was less.

More favorable IRA deduction phaseout rules. The income phaseout ranges for deductible IRA contributions have been increased for active participants in employer-sponsored retirement plans. For 1999, the IRA deduction phases out over $31,000 to $41,000 of adjusted gross income for single taxpayers, and over $51,000 to $61,000 for joint filers. (For 1998, the phaseout ranges were $30,000 to $40,000 for singles and $50,000 to $60,000 for joint filers.)

Next month we will highlight business and estate tax changes. If you have any questions, please call us.

Please call us if you would like to discuss the details of your particular circumstances.

Veres & Company
Certified Public Accountants
Freedom Square Office Park
4401 Rockside Road, Suite 406
Independence, Ohio 44131
(216) 524-8422
Fax (216) 524-2624
e-mail: staff@veres.com