ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, August 23, 1996 TAG: 9608230048
SECTION: BUSINESS PAGE: A-13 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Would-be adoptive parents, airline travelers, luxury car buyers and students whose employers pay their tuition have some tax planning to do now that President Clinton has signed legislation raising the minimum wage.
The bill, enacted Tuesday, includes a long list of tax provisions. Many taxpayers can avoid an increase or take advantage of a new break by hurrying some events and deferring others.
For instance, the bill provides a $5,000 credit - a direct subtraction from tax liability - for the expenses of adopting children both in the United States and from a foreign country.
There's a $6,000 credit for adoptions of special-needs children - who are mentally or physically handicapped, for instance - in the United States.
The credits apply to adoptions completed starting Jan. 1 and for expenses incurred or paid starting then, according to Bill Pierce, president of the National Council for Adoption. Expenses incurred during the year before the completion of a foreign adoption also are eligible, he said.
The credit is phased out for families with incomes between $75,000 and $115,000. So a family planning an adoption next year may want to minimize their 1997 income by moving income - a job bonus or income on the sale of stock - into 1996.
The new tax law also affects car buyers. It reduces the tax on luxury autos, starting Tuesday, from 10 percent to 9 percent. The tax applies to purchase amounts above $34,000.
So the tax on a $44,000 car - now $1,000 - would drop to $900 starting Tuesday. The tax drops 1 percent a year until it hits 3 percent in 2002, when it expires.
The law reinstates the lapsed 10 percent ticket tax on domestic airline flights, effective Tuesday through the rest of the year. Travelers planning a flight later this year would want to purchase their tickets before Tuesday.
Someone planning a flight early next year could wait to see if Congress allows the tax to lapse again after Dec.31.
Meanwhile, upper-income individuals planning big withdrawals from their retirement plans will want to wait until next year. In 1997, 1998 and 1999, the new law waives the 15 percent excise tax on distributions from retirement plans in excess of $150,000.
In another provision, the law retroactively restores the $5,250 tax break for employer-paid tuition. It lapsed at the end of 1994, and about 800,000 taxpayers who filed their 1995 returns this spring had to pay income tax, as well as Social Security and Medicare payroll taxes, on tuition that their employer paid.
Affected taxpayers can get an income tax refund by filing a Form 1040X to the IRS. They should include a Form W-2c (a corrected W-2) issued by their employer. The deadline for amended returns is three years after the due date of the original return.
LENGTH: Medium: 59 linesby CNB