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Page 24 THE SOUTHERN ISRAELITE November 28, 1986
Business
The new tax reform bill
Its impact on year-end tax planning strategies
If you’re like many Americans,
•you’re probably wondering how
tax reform will affect you and
whether it means more money in
your pocket and less in Uncle
Sam's. But just sitting back and
waiting to see w hat happens won't
help, according to the Georgia
Society of CPAs. Now is the time
to initiate year-end tax strategies
to help you make the most of
your money.
Before you can determine how
to plan for the potential impact
of the tax retorm bill, prepare a
projection of your 1986 income
and expenses^ Determine what
your taxable income and corres
ponding tax bracket will be in
I986and attempt to project what
your income and expenses should
be in 1987. But accelerating de
ductions and deferring income,
many taxpayers can take advan
tage of current and future tax
breaks.
If your taxable income will be
lower this year than your projec
tions for 1987, or you find your
self in an Alternative Minimum
Tax situation where income is
taxed at a relatively low rate of
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neludes short-term
ployed or has his or her own bus
iness is allowed to contribute as
much as $2,000 a year, fully tax
deductible, into an account of
their own and as much as $250
into an account for a non-working
spouse.
This will change under the new
bill. Married couples who have
an adjusted gross income exceed
ing $50,000 will no longer be
allowed to take a deduction for
an IR A if one or both are covered
by an employer’s pension plan.
Single individuals with an ad
justed gross income over $35,000
will also be excluded if they are
covered by a pension. Only those
who are not able to participate in
an employer sponsored pension
plan, or make a maximum of
$40,000 as a married couple or a
maximum of $25,000 as an indi
vidual, will retain the full deduc
tion.
Under the tax reform bill, the
maximum contribution will be
restricted to $7,000, down from
$30,000. And, those who are elig
ible to contribute to IRAs will
have to make a choice between
the two programs which will offer
a better tax deduction and a bet
ter retirement plan.
Three tips for retirement plan-
ningin 1986 are: Take advantage
of your eligibility to participate
in any retirement plan for tax
deductions this year: open a new
plan that is still available to you
under the tax reform act, and if
retired, defer taxable distributions
from your IRAs, when possible,
to save tax dollars under the
lower tax brackets in 1987.
This material prepared and
supplied by the Georgia Society
of Certified Public Accountants
Inc.
WrttMUl 1
only 20 percent, it might pay to
accelerate income into this year
and defer certain deductions into
next year.
For those of you who will have
more taxable income this year
and fewer deductions in 1987,
your overall tax strategy should
be to defer as much taxable in
come as possible into next year,
since your personal income tax
rates may be lower. You should
also consider accelerating as many
deductions as possible this year.
Deductions to concentrate on
are state and local sales taxes,
consumer interest payment de
ductions, medical expenses and
miscellaneous expenses, since they
will either be eliminated or more
difficult to take Dec. 31, 1986.
Another deduction you should
look at is charitable contribu
tions. They can add up, espe
cially for those of you who donate
regularly to certain groups such
as your church, civic organiza
tion or favorite charity. This de
duction will still be fully allowed
under the new tax bill, but only
to those those who itemize their
deductions. Now is the time to
take account of exactly how much
you contribute to charitable
causes.
Other deductions you should
consider are state and local esti
mated taxes, real estate and per
sonal property taxes. Consider
making any payments by Dec. 31
that are due in January. These
could be worth more in 1986
than in 1987.
The second step in your year-
end tax planning strategy is to
assess your capital gains on your
investments.
Beginning in January 1987,
realized long-term capital gains
will be taxed at the same rate as
the rest of your income. To take
advantage of the current rela
tively lower tax rate, you should
consider selling any investments
you have held longer than six
months that have proven to be
particularly profitable.
Currently, anyone who is em
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