Word: deduction
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...partly disabled people who collect pension payments from a former employer while holding down a part-time or less demanding job. A typical example is a policeman with a heart ailment who leaves the force and takes on lighter duties as a department store guard. Last year he could deduct $5,200 of his police pension income. This year he cannot deduct any of it, since he is not totally disabled, and he now owes a big tax bill. One Colorado couple's tax liability jumped from...
CHILD CARE provisions are broadened, allowing many more working parents to offset baby-sitting costs. Through last year, a parent or couple could deduct up to $4,800 a year in child-care expenses; now they get a maximum tax credit of $400 a child (limit: $800). The credit can be taken by parents no matter how rich; the old deduction dwindled for people with incomes of $35,000 or more, and stopped altogether at $44,600. The credit is available to people who could not claim the deduction: for example, couples consisting of one worker and one student...
...HOME OFFICE is apparently knocked out as a source of deductions for many teachers, salespeople, freelance writers, photographers and artists. No longer can, say, a teacher who grades tests and homework at home deduct part of his expenses for maintaining the dwelling. By and large, such deductions are now available only if the home office is a room that is used exclusively as an office-not just a desk or drafting table in the den-and is the taxpayer's "principal place of business." Loss to taxpayers: $207 million...
Taxpayers will have many more -though generally more pleasant-changes to cope with next year under the new law. Divorced people filing returns now can deduct alimony payments only if they itemize deductions; next year they will be able to deduct alimony from gross income and then take the standard deduction...
People who own homes-two-thirds of all American families-can deduct the interest they pay on their mortgages, a powerful stimulus for the housing industry. But the mortgage-interest deduction discriminates against renters. It also favors wealthy taxpayers, who frequently have large mortgages. About 25% of the $60 billion in personal income that escapes taxation each year because of deductions, credits and exemptions is kept by people with adjusted gross incomes of $50,000 or more, a group that constitutes only 1% of all taxpayers. Making use of the same laws, corporations avoid paying taxes on about $25 billion...