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CHANGE.DOC
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Important Changes for 1992
This section summarizes important tax changes that took effect since this
publication was last revised. These changes are discussed in more detail
throughout this publication.
These changes are also discussed in Publication 553, Highlights of 1992 Tax
Changes.
The tax tables may now be used by individuals with taxable income of less
than $100,000. Individuals with taxable income of $100,000 or more should
continue to use the tax rate schedules.
Estimated tax payments - limit on use of prior year's tax. Beginning in 1992
certain taxpayers (other than farmers and fishermen) may not be able to use
100% of their prior year's tax to figure their current year's estimated tax.
Earned income credit. To claim the credit for 1992, both your earned income
and your adjusted gross income must be less than $22,370. The maximum basic
credit is $1,324 with one qualifying child and $1,384 with two or more
qualifying children. In addition you can elect to claim a supplemental
credit of up to $376 if at least one qualifying child was under one year
old. You can also elect to claim an additional credit of up to $451 for
premiums paid for health insurance covering one or more qualifying children.
If you are an employee, your employer can pay you an advance earned income
credit up tp $1,324.
Filing requirements. Generally, the amount of income you can have before
you are required to file a return has been increased. See Chapter 1.
Higher exemption amount. For 1992, you are allowed a $2,300 deduction for each
exemption to which you are entitled. However, your exemption amount could be
phased out if you have high income. See Chapter 3.
Standard deduction. For most people, the standard deduction has increased.
Because of this increase, it may benefit you to take the standard deduction
for 1992 even though you itemized deductions in past years. See Chapter 20.
Limit on itemized deductions. Some of your itemized deductions may be limited
if your adjusted gross income is more than $105,250 ($52,625 if you are
married filing separately). See Chapter 21.
Standard mileage rate. For 1992, the standard mileage rate for the business
use of a car is 28 cents a mile for all business miles. See Chapter 28.
New schedule C-EZ for self employed taxpayers. Sole proprietors with $25,000
or less of gross receipts and not more than $2,000 of expenses may be able to
use this new form. If so, it will take the place of schedule C.
Extensions of expiring tax items. The following items, scheduled to expire
December 31, 1991, were extended through June 30, 1992.
∙ Exclusion for employer-provided educational assistance (see Chapter 6)
∙ Exclusion for employer-provided group legal services (see Chapter 6)
∙ Deduction for 25% of the health insurance costs of self-employed
individuals (see Chapter 22)
Recapture of federal subsidy. If you financed your main home after 1990 under
a federally-subsidized program (loans from tax-exempt qualified mortgage bonds
or loans based on mortgage credit certificates), you may have to recapture (by
increasing your tax) all or part of the benefit you received from that program
when you sell or otherwise dispose of your home. See Chapter 16.
Tax rates for 1992. There are three tax rates (15%, 28%, and 31%). See
Chapter 31.
Tax indexing. The Tax Table and Tax Rate Schedules have been adjusted so that
inflation will not increase your tax.
Maximum tax rate on capital gains. The maximum tax rate on net capital gains
is 28%. See Chapter 17.
Self-employment tax. In 1992, the maximum net earnings subject to the social
security tax portion of self-employment tax (12.4%) has increased to $55,500,
while the maximum net earnings subject to the Medicare tax portion (2.9%) has
increased to $130,200. See Chapter 31.
Social security and Medicare taxes. In 1992, the maximum wages subject to
social security tax (6.2%) has increased to $55,500, while the maximum wages
subject to Medicare tax (1.45%) has increased to $130,200. See Chapter 31.
Some areas in Florida and Louisiana affected by hurricane Andrew and some
areas in Hawaii affected by hurricane Iniki have been declared disaster
areas. Losses in these areas may be deducted in the prior year by filing
an ammended return. Or they may be deducted on the 1992 return. For more
information see Publication 547, Nonbusiness Disasters, Casualties, and
Thefts.
Pending legislation. Proposed changes to the tax law could affect your 1992
tax. If these proposals are enacted, you may need to adjust your withholding
or estimated tax payments to avoid owing a penalty for underpayment of
estimated tax. See Chapter 5 for highlights of the items that may be changed.