Masonry Magazine February 1989 Page. 42
free for joint filers with AGI between $60,000 and $90,000 ($40,000 and $55,000 for singles). To qualify for the tax break, the bonds must be kept in the parents' name and must be redeemed by them.
Telephone Deduction Tightens
Up until now, business people and investors could deduct the business use portion of local telephone service in their residence. The new law knocks out any deduction for the cost of local telephone service starting in 1989. The new rule only applies to the first telephone line in your residence. The best bet is to have two lines come into your home: one to be used for nondeductible personal purposes and the second one 100 percent for business use, which will be fully deductible.
It should be pointed out that the new rules do not affect deductions for the cost of long-distance telephone calls, equipment rental, additional telephone lines or other optional services used for business purposes.
Pain of Separate Filing for Children Alleviated
Under present law, a dependent child under age 14 with any unearned income and total income over $500 had to file his or her own tax return. The new law, starting in 1989, allows parents with children under 14 years old to report the children's investment income on their tax return.
How does the parent report and pay for the child's income? The first $500 of the child's income is tax free; the next $500 is taxed at 15 percent and is added to the parent's tax liability; and any amount over $1,000 is added to the parent's taxable income and paid at their top tax rate. It should be noted that the amount of tax due on the child's income is the same if the child files a separate tax return or includes the income in the parent's return.
The parents can elect to include their child's income on their return if (1) the child's income is less than $5,000; (2) the income is only from interest and dividends; and (3) the child did not make estimated payments in his or her name. When the parents elect to include the child's income on their return, the child is not required to file a tax return.
Targeted Jobs Credit Extended
Congress has extended the targeted jobs credit for one year to employees who begin work in 1989. The credit was scheduled to expire at the end of 1988. Under the old law and the extension, an employer can claim a tax credit if he hires employees who are members of any of nine targeted groups. In general, the credit allows a dollar-for-dollar reduction in the employer's tax liability up to 40 percent of the first $6,000 of salary paid to each qualified new employee during the first 12 months he or she works.
For 1989, the age range has been changed to 18-to-22 on the date of hire for qualifying economically disadvantaged youths. The age spread was 18-to-24 under prior law. There is one more change: The credit for hiring economically disadvantaged summer workers, aged 16 or 17 on the hiring date, will be 40 percent (reduced from 85 percent in 1988) of the first $3,000 of wages paid for services during any 90-day period between May 1 and September 15.
New Law Cannot Cause Penalty for Under-estimating Tax
The new law changed the rules in the middle of the game for 1988. As a result, many taxpayers could be socked continued on page 44