The following information is a brief overview of the tax law changes that are effective
in 1996. Some items will be discussed in more detail in separate topics. Remember, this
information is effective for your current 1996 return.
1) Personal Exemption Amount - For 1996, the deduction allowed for each exemption has
increased to $2,550. Your deduction may be reduced or eliminated if your adjusted gross
income is more than the following amounts:
If your filing status is married filing jointly or qualifying widow or widower -
$176,950;
If your filing status is head of household - $147,450;
If your filing status is single - $117,950; or
If your filing status is married filing separately - $88,475.
Refer to Publication 501, Exemptions, Standard Deduction, and Filing Information, for
more details.
2) For 1996, the standard deduction has changed for many individuals. Refer to Topic
551.
3) To qualify for the earned income credit for 1996, the sum of your taxable and
non-taxable earned income, as well as your adjusted gross income, must be less than
$25,078 if you have a qualifying child, $28,495 if you have two or more qualifying
children or less than $9,500 if you do not have a qualifying child. Beginning in 1996, you
can not claim EIC, if your Investment income includes taxable interest, dividends,
tax-exempt interest and net income from rents and royalties. For more information
concerning the changes to the earned income credit, refer to Topic 601.
4) A social security number is now required for any person born before December of 1996
who is being claimed as a dependent or as a qualifying child for purposes of the earned
income credit.
5) Generally, the amount of income you can have before you are required to file a
return has increased for 1996. Refer to Topic 351 for additional information on Who Must
File.
6) For 1996, you may be subject to an overall limit on some of your itemized deductions
if your adjusted gross income is more than $117,950 ($58,975 if you are married filing
separately). Refer to Topic 501 for additional information.
7) In 1996, the maximum wages subject to the social security tax has increased. Refer
to Topic 751 for more information.
8) The standard mileage rate for business miles has increased to 31 cents in 1996. The
special rate for rural mail carriers has increased to 46.5 cents. The standard mileage
rate allowed as a medical or moving expense has been increased to 10 cents.
9) The self-employed health insurance deduction has been extended for 1995 and
succeeding years and the percentage remains unchanged at 30%.
10) Various tax benefits are available for U.S. Military and support personnel involved
in the peace keeping efforts in Bosnia and Herzogovina, Croatia and Macedonia. Refer to
Publication 3, Armed Forces Tax Guide, for more details.
For more information on these and other tax law changes, refer to Publication 553,
Highlights of 1996 Tax Changes.
