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
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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:
 
1. On the Tools menu, click Options.
 
2. On the Investments Tab, change the value in the Capital Gains fields
   from 1 year to 18 months, and then click OK.
 
3. 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.
 
 - 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.
 
 - 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
 
If you meet the criteria for the lower Maximum Capital Gains rate, manually
change the maximum capital gains rate using the following steps:
 
1. On the Tools menu, click Options.
 
2. On the Tax Tab, select the appropriate Filing Status.
 
3. 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.
 
4. Select Custom in the Filing Status field.
 
5. Fill in all the fields based on what you wrote down.
 
6. Set the "Long-Term Capital Gains Are Taxed At A Maximum Rate Of"
   field to 15 percent.
 
Additional query words: w_money 6.0 woody worksheet
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Keywords          : kbdta
Version           : WINDOWS:98
Platform          : WINDOWS
Issue type        : kbhowto
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Copyright Microsoft Corporation 1998.