FEDERAL TAX LAWS CHANGED LITTLE SINCE LAST YEAR'S FILINGS

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, February 1, 1992                   TAG: 9202010177
SECTION: BUSINESS                    PAGE: A-9   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium
FEDERAL TAX LAWS CHANGED LITTLE SINCE LAST YEAR'S FILINGS
Federal tax law is always a moving target, but 1991 saw fewer changes than in any other year in recent memory.
That means most taxpayers should be able to use their 1990 tax returns as a guide when they fill out their forms this year. Most of the few changes were made simply to reflect inflation.
But there are some substantive new provisions, and most of them will be felt by higher-income Americans. These were enacted by Congress to offset what many lawmakers viewed as overly generous tax cuts for top earners in the 1980s.
Here are highlights of the changes:

Exemptions. For each exemption, a taxpayer is allowed to subtract $2,150 (up from $2,050 last year) from income subject to taxation. In most cases, a taxpayer is allowed an exemption for himself or herself, a spouse and each dependent child.
Higher-income people - for example, couples with income of $150,000 or more - will claim their exemptions as usual on the front of Form 1040 and then calculate on a new worksheet how much they have to give back. A couple filing a joint return gets no exemption once income exceeds $272,500.

Standard deductions. Taxpayers who do not itemize - and that includes more than 70 percent of us - are allowed a standard deduction, which reduces the amount of income subject to tax. For 1991 returns, the deduction generally is $3,400 for a single person, $5,700 for a couple filing a joint return, $5,000 for a qualified head of household and $2,850 for a married person filing a separate return. The deductions are larger for a person 65 or older, or blind, and can be smaller for dependents.

Tax rates. A year ago the top tax rate was 33 percent; now it is 31 percent. However, the top rate on capital gains, or profits from the sale of investments, is 28 percent. Most people pay a 15 percent rate on any income.
The tax brackets are adjusted each year so that the combination of inflation and a cost-of-living pay raise will not nudge taxpayers into higher brackets. Tax rates are multiplied by taxable income - what is left after deductions and exemptions are subtracted - to determine tax liability.
Broadening the brackets to offset inflation produced these tax rates for 1991: For a single person, the first $20,350 of taxable income is taxed at 15 percent; the next $28,950 at 28 percent; and everything over $49,300 is taxed at 31 percent.
The first $34,000 of a couple's taxable income is taxed at 15 percent; the next $48,150 at 28 percent; and all over $82,150 faces a 31 percent rate.

Interest. No consumer interest may be deducted on 1991 returns. The gradual reduction of the write-off for auto loans, credit cards and similar borrowing began in 1987 and now is complete. Similarly, the deduction for investment interest has been cut.
Only investment interest equaling net investment income may be deducted on 1991 returns; any amount not allowed because of that limitation may be carried over into future years.
These restrictions do not affect borrowing for a home mortgage.

Earned-income credit. This benefit for low-income working families with children was expanded for 1991 but greatly complicated in the process. The credit can reduce taxes by as much as $2,020 if all qualifications are met.
At least a part of the credit generally is available to families with one or more children and earned income - wages, tips and the like - of under $21,250. The basic credit declines as income exceeds $11,250.

401(k) plans. The maximum amount of income that could be contributed to these employer-sponsored retirement accounts in 1991 was raised to $8,475.

Mileage. The mileage deduction for unreimbursed use of a personal car for business has gone up to 27 1/2 cents per mile. The mileage deduction for charitable purposes remains at 12 cents and for medical purposes at 9 cents a mile.

Social Security cards. Any child who was at least 1 year old at the end of 1991 and is claimed as a dependent must have a Social Security number. Apply for a number by filing Form SS-5 with the Social Security Administration.

by Bhavesh Jinadra by CNB