Microsoft KB Archive/177034

Money 98: Adjusting Tax Estimator for Taxpayer Relief Act of ’97

PSS ID Number: Q177034 Article last modified on 08-18-1998

WINDOWS:98

WINDOWS

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The information in this article applies to:

 == Microsoft Money 98 == 

= SUMMARY =

On August 5,1997 President Clinton signed the Taxpayer Relief Act of 1997 (TRA) into law. This article describes the steps to take these changes into account so that the Tax Estimator and Tax Advice is up-to-date when interacting with Money.

The Tax estimator is designed to allow an average user an estimation of how much Federal Income Tax withholding he or she should have taken out of their paycheck. It makes general assumptions and is not intended to replace advice from a qualified tax planner.

= MORE INFORMATION =

To take advantage of the changes in tax laws, make the following changes in Money:

  On the Tools menu, click Options.   On the Investments Tab, change the value in the Capital Gains fields from 1 year to 18 months, and then click OK.   On the Money Home Page, click Update Internet Information. NOTE: This updates the “Long-Term Capital Gains Are Taxed At A Maximum Rate Of” field on the Tax tab in Options to 20 percent. 

Detailed Explanation
The following outlines the major parts of the new tax law and some steps for customizing Money if these changes affect you.

  The top rate is reduced from 28 percent to 20 percent for investments held at least 18 months. The holding period is only 12 months if the investment was sold during the period after May 6, 1997 but before July 29, 1997. If you sold an investment between May 6, 1997 and July 29, 1997, if that investment had been held between 12 months and 18 months, the Money Tax Estimator taxes the gain from that transaction at your short term (marginal income tax) rate and thus may overestimate your tax liability.   Gains on capital assets sold after July 28, 1997 but held less than one year will be taxed at ordinary income tax rates. This is accounted for by changing the definition of a long term capital gain from 1 year to 18 months. </li>  Gains on capital assets sold after July 28, 1997 and held between 12 and 18 months (mid-term gain) will be taxed at a maximum rate of 28 percent. NOTE: Money does not use mid-term capital gains. After updating tax rates as described above, Money taxes any investments held longer than 18 months as long-term gain (at 20 percent) and anything held under 18 months as short-term gain. In essence this means that Money may overestimate your tax by applying the short term rate. </li>  For taxpayers whose taxable income keeps them in the 15 percent tax rate bracket, the maximum capital gains tax rate is reduced to 10 percent. The upper limit of the 15 percent bracket for each category is: Single = $24,649.00 Married Joint = $41,199.00 Married Sep = $20,599.00 Head of Household = $33,049.00 </li></ul>

If you meet the criteria for the lower Maximum Capital Gains rate, manually change the maximum capital gains rate using the following steps:

<ol style="list-style-type: decimal;">  On the Tools menu, click Options. </li>  On the Tax Tab, select the appropriate Filing Status. </li>  Note the income breakdowns and tax rates for all income fields. NOTE: It is important that you write this information down before proceeding, because this information disappears when you follow the next step. Click Cancel at any time if you want to return to your previous settings. </li>  Select Custom in the Filing Status field. </li>  Fill in all the fields based on what you wrote down. </li>  Set the “Long-Term Capital Gains Are Taxed At A Maximum Rate Of” field to 15 percent. </li></ol>

= Additional query words: w_money 6.0 woody worksheet =

Keywords : kbdta Version : WINDOWS:98 Platform : WINDOWS Issue type : kbhowto ============================================================================= Copyright Microsoft Corporation 1998.