Few new tax rules in '91, but look out for '92

January 26, 1992|By Jim Talley | Jim Talley,Fort Lauderdale Sun-Sentinel

FORT LAUDERDALE, Fla. -- If you received your tax return booklet this month but haven't been able to look at it, take heart: When it comes to new tax rules to decipher, 1991 was probably the most uneventful year in a long time.

"A lot of things just carried over, so 1991 was not significant at all," said Sheldon Polish, tax director at Ernst & Young, the big accounting firm.

But with a recession to slay and national elections to win this fall, the stage is set for myriad changes.

"Hold your breath," said Steve Preston, Arthur Andersen's partner-in-charge of the tax division in Fort Lauderdale. "There are a lot of things being floated, and 1992 is still an unknown."

It probably will be months before Congress completes whatever changes are to be made. But members of both political parties are tripping over one another to field a bevy of tax relief proposals.

Some tax experts contend chances are good that many taxpayers will benefit -- with one caveat.

"It depends on what is defined as the rich," said Peter Woolf, tax partner at Price Waterhouse. "I've seen $50,000 and up, depending on which congressman you're talking to, and with two people working, there are more than a few families with that."

What's on the horizon?

Observers view a tax cut for middle-income taxpayers and a cut in the capital gains tax rate as safe bets.

Also considered likely is a change for Individual Retirement Accounts. Proposals include restoring tax deductible contributions, allowing penalty-free withdrawals to first-time home buyers and keeping IRA contributions non-deductible but permitting tax-free withdrawals at retirement age.

"I think you're going to see something on IRAs. It's an election- winner," Mr. Woolf said.

Other possibilities include a tax credit for buyers of real estate from the Resolution Trust Corp., which holds assets of defunct savings and loan institutions, and the lessening of restrictions on the deductibility of losses from real estate activities.

Meanwhile, there's a smattering of modest good news for the 1991 returns taxpayers will be preparing in coming weeks.

The standard deduction and the personal and dependent exemption amounts have been increased a bit.

The depreciation limits for automobiles and the standard business mileage rate deduction are a little more generous.

And enlisted military personnel who served in Operation Desert Storm escape tax on income earned while they were serving in the designated combat zone.

On the downside, the deduction for personal interest paid is completely phased out for 1991.

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