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Show t 12 HILL TOP TIMES Friday, October 17, 1986 Pgmd OR)., tan By Lt. Col. Woodrow Certified Public Accountant England AFB, La. J. Bergeron Everyone is aware of the pending tax law changes and the news media is full of descriptions of how those earning $100,000 per year will lose some of their tax shelters. But for the military members no one has really explained how those changes will affect them. Some of the changes, such as to the deductibility of moving expenses, are of more than a passing interest to the military community. Here is a detailed description of the tax law changes that will most probably impact on the military family and what needs to be done to prepare yourself financially for these changes. Be. careful of what you hear on the national media. Most of the legislation which is controversial will have little direct impact on the typical military family. Yet, these will be the sections of the proposed law which will get the most attention. This article assumes the typical military family may own their house, may have some investments, and may have a rental house. Those who have incomes of more than $50,000, tax shelters, corporate "berries," and the like will object to some portion of the proposal although these changes will be phased in to lessen the impact to them. Also, remember virtually all parts of the changes will have no bearing on the filing of your 1986 return. The changes start in 1987 and you won't low have to worry about the changes until filing in 1988. But some changes will force you to make some investment decisions now. .The majority of military people will enjoy the new tax reform since officers and enlisted earning less than $40,000 will have their taxes reduced from 8 percent to 65 percent with the lower grades receiving the largest reduction. But this will be in 1988. Next year will be a transition year with tax rates lower than present, but not as low as they will be in 1988. So expect to see less withheld from your paycheck in 1987 and even less withheld in 1988. The exact withholding tables will be published later. Also remember if your spouse works or if you are receiving incentive pay then the percent reduction will be less. In 1988, it will be easy to figure your tax rate: Below $29,750 of taxable income, the rate is 15 percent. Twenty-eigh- t percent is the rate above this. Both the standard deduction and personal exemption will increase, so your taxes will be less. Here are some of the other changes and how they will affect you. IRAs: Don't listen to the half truths. There will continue to be individual retirement accounts. If you earn less than $25,000 and are single (most s and below), you'll be able to deduct your contribution to your IRA up to $2,000. , If you're married and you earn less than $40,000 (all enlisted and most officers), you'll be able to deduct it, too. Only those with taxable incomes above this amount may or may not be allowed to deduct a portion of their IRA contribution. They will be able to save in their IRA but not deduct it. There are no changes to these IRA rules for the money already invested. These new provisions start in 1987. Your 1986 IRA contribution is not affected and should be made if you can save for E-8- g)(iS your retirement. Uniform expenses: For itemizers, the expense of cleaning special purpose uniforms has been a frequent additional minor deduction. In 1987, this will be subject to a 2 percent floor. Translation: You're an E-- 6 with a taxable income of $16,500 and have no other miscellaneous itemized deductions. Two percent of $16,500 or $330 worth of these deductions would have to be claimed before any reduction in taxes would occur. Other miscellaneous deductions would be all lumped together before figuring the 2 percent floor. Other miscellaneous deductions include income tax preparation expenses, educational expenses, investment expenses and the like. Moving expenses: This will become a miscellaneous expense in 1987. This is one change which is not beneficial to the military considering the number of moves we make. However, it will not be sub- ject to the 2 percent floor. This means that if you move after January 1987, you must itemize to deduct any moving expenses. As in most cases, you must total all expenses and subtract all allowances paid by the government such as dislocation and travel payments in order to figure your moving expense. If you "broke even" or want to say you "broke even," that's OK. As a government employee, you don't have to claim those reimbursements unless the move cost you more than you were paid. For those moving because of permanent change of station later this year, get a moving expense form and read the moving expense rules carefully. 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