Key tax changes in sight

Nation's Business, July, 1989

Key Tax Changes In Sight Even if no tax-law changes are enacted this year, keep in mind that Congress, through prior actions, already has established several changes to take effect in 1989. They show that you can raise taxes without raising rates.

* Taxpayers eligible for Medicare Part A will owe a supplemental Medicare premium, reportable and payable with the 1989 return. It could be as much as $800 per person, or $1,600 on a joint return. Taxpayers cannot decline this coverage for catastrophic illnesses. The maximum premium is set to increase in later years.

* Beginning in 1989, a taxpayer cannot claim a dependency exemption for a child who is 24 years old by the end of the year and has income over $2,000. This applies even if the child is a fulltime student.

* Also beginning this year, new rules apply to the child- and dependent-care credit and the exclusion for dependent-care assistance. The dependent must be under 13 years old (lowered from age 15). Taxpayers must report the name, address, and taxpayer identification number of the care provider to the IRS. If the taxpayers receive reimbursement from an employer's program for dependent-care assistance, the dollar limit on expenses eligible for the credit is reduced.

* The targeted job credit has been extended through 1989. For purposes of the credit, however, an economically disadvantaged youth must be at least 18 years old but under 23. Research and business energy credits have been extended through 1989.

* Beginning in 1989, no deduction is allowed for the part of qualified research and experimental expenses equaling 50 percent of the research credit for the year. A company that does not want its deduction reduced can elect not to claim the research credit.