The following is a reprint of a message I received from the Internal Reveue Service on February 2, 1999. The notes are brief and do not cover all the details of the new laws, but they should encourage you to ask your tax preparer about anything that sounds applicable to you.

WHAT'S NEW FOR 1998?

CHILD TAX CREDIT
Taxpayers may claim a child tax credit of up to $400 for each eligible dependent under the age of 17. The total credit is reduced by $50 for each $1,000, or part thereof, of income above $75,000 ($110,000 for joint returns, $55,000 for married persons filing separately). The child tax credit normally cannot be more than the tax liability, with exceptions for some taxpayers who have three or more qualifying children.

EDUCATION CREDITS
The Hope credit and the lifetime learning credit are based on tuition and related fees paid for the taxpayer, spouse, or an eligible dependent. A taxpayer may claim only one of these education credits for each eligible student in a single tax year. The credits are not available for taxpayers with incomes above $50,000 ($100,000 for joint returns). Dependents, and married persons who file separately, cannot claim the education credits. The Hope credit applies for only the first two years of post-secondary education. The maximum credit is $1,500, on tuition expenses of $2,000 or more. Both the payment and start of the related academic period must have been after 1997. The lifetime learning credit, which began July 1, 1998, is available for any level of higher education. The credit is 20 percent of the tuition paid for all eligible students, with an annual maximum credit of $1,000 per tax return.

STUDENT LOAN INTEREST DEDUCTION
Taxpayers may deduct up to $1,000 of interest paid on a qualified student loan, but only during the first 60 months of the loan's repayment schedule. A taxpayers does not have to itemize deductions to claim this benefit, but cannot be claimed as a dependent, nor be a married person filing separately. The deduction is not available for those with incomes above $55,000 ($75,000, for a married couple filing jointly).

EDUCATION IRA
Taxpayers may use this as a vehicle to save for college. The account beneficiary must be under age 18 when the contribution is made and the annual limit is $500 per beneficiary. The contribution is not deductible and is not reported on the donor's tax return. Earnings on the account are tax-deferred and will become tax-free if used for qualifying higher education expenses.

DEDUCTING IRA CONTRIBUTIONS
Higher income limits for deducting IRA contributions apply to workers covered by an employer retirement plan: $40,000, $60,000 for a married person filing jointly. If only one spouse is covered by a plan, the other spouse may make deductible IRA contributions if their joint income is under $160,000.

ROTH IRA
While taxpayers cannot deduct contributions to this retirement account, they will not have to pay taxes on withdrawals if it has been five years since they first opened a Roth IRA and they are age 59 1/2 or the withdrawal is because of disability, death, or a first-time home purchase ($10,000 limit). A person may convert a traditional IRA to a Roth IRA without penalty, and include the taxable amount in that year's income as though it were a distribution. For conversions done in 1998, the taxpayer may spread the taxable amount equally over the four-year period 1998 through 2001.

CAPITAL GAINS TAX RATES
The lowest maximum tax rates on capital gains now apply to assets held for more than one year, rather than 18 months. This shorter holding period applies to all assets sold in 1998. The rates are: 20% for most gains, but 10% for gains that would be in the 15% tax bracket; 25% for gains resulting from the depreciation of real estate; 28% for gains on collectibles and qualified small business stock. All taxpayers with capital gains will have to use Schedule D (Form 1040). They will no longer report capital gain distributions from mutual funds on Schedule B.

SALE OF RESIDENCE
Taxpayers will not have to report the sale of a residence on their tax forms unless they had a taxable gain. If a person owned and used a home as a principal residence for two of the five years preceding the sale, up to $250,000 of gain may be excluded ($500,000 on a joint return). This tax break may be used only once every two years. A taxpayers who fails to meet the two-year residency requirement because of a change in health, employment, or unforeseen circumstances may prorate the maximum exclusion by the percent of the two-year requirement met. This proration also applies for any person who had a residence on August 5, 1997, and sells it before August 5, 1999.

SELF-EMPLOYED HEALTH INSURANCE DEDUCTION
Self-employed persons may deduct up to 45% of their health insurance premiums for every month they were not eligible to participate in an employer-sponsored health plan.

STANDARD MILEAGE RATES
You may deduct 32 1/2 cents a mile for all business miles driven, up one cent from 1997. The rate for charitable contributions rose two cents, to 14 cents per mile. The rates for medical and moving expenses (10 cents per mile) are unchanged.

PAYMENT OF TAX DUE
Taxpayers who are sending a check for their tax owed should make it payable to the United States Treasury, not the Internal Revenue Service, and should not staple the check to the tax return.

ESTIMATED TAX PENALTY
There is generally no penalty if the balance due on the tax return is less than $1,000, including any household employment taxes.