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IRS RELEASES INFLATION ADJUSTED TABLES FOR 1998.

DEC. 15, 1997

Rev. Proc. 97-57; 1997-2 C.B. 584

DATED DEC. 15, 1997
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Citations: Rev. Proc. 97-57; 1997-2 C.B. 584

For 1999 inflation-adjusted tables, see Rev. Proc. 98-61. For 1997 inflation-adjusted tables, see Rev. Proc. 96-59.

Rev. Proc. 97-57

 Table of Contents

 

 

 SECTION 1. PURPOSE

 

 

 SECTION 2. CHANGES MADE FROM PRECEDING YEAR

 

 

 SECTION 3. 1998 ADJUSTED ITEMS

 

 

      Section                                           Code

 

 

  .01 Tax Rate Tables                                   1(a)-(e)

 

 

  .02 Unearned Income of Minor Children Taxed           1(g)

 

      as if Parent's Income ("Kiddie Tax")

 

 

  .03 Earned Income Tax Credit                          32

 

 

  .04 Standard Deduction                                63

 

 

  .05 Overall Limitation on Itemized Deductions         68

 

 

  .06 Qualified Transportation Fringe                   132(f)

 

 

  .07 Income from United States Savings Bonds           135

 

      for Taxpayers Who Pay Qualified Higher

 

      Education Expenses

 

 

  .08 Personal Exemption

 

 

  .09 Eligible Long-Term Care Premiums                  213(d)(10)

 

 

  .10 Treatment of Dues Paid to Agricultural or         512(d)

 

      Horticultural Organizations.

 

 

  .11 Insubstantial Benefit Limitations for             513(h)

 

      Contributions Associated with Charitable

 

      Fund-Raising Campaigns

 

 

  .12 Expatriation to Avoid Tax                         877

 

 

  .13 Luxury Automobile Excise Tax                      4001 & 4003

 

 

  .14 Reporting Exception for Certain Exempt            6033(e)(3)

 

      Organizations with Nondeductible

 

      Lobbying Expenditures

 

 

  .15 Notice of Large Gifts Received from               6039F

 

      Foreign Persons

 

 

  .16 Property Exempt from Levy                         6334

 

 

  .17 Attorney Fee Awards                               7430

 

 

  .18 Periodic Payments Received under Qualified

 

      Long-Term Care Insurance Contracts                7702B(d)

 

 

 SECTION 4. EFFECTIVE DATE

 

 

 SECTION 5. DRAFTING INFORMATION

 

 

SECTION 1. PURPOSE

This revenue procedure sets forth inflation adjusted items for 1998.

SECTION 2. CHANGES MADE FROM PRECEDING YEAR

.01 In preceding years, this revenue procedure included a detailed description of each inflation adjusted item in former section 3, a technical explanation of the authority for each inflation adjustment in former section 4 and the inflation factors used to make the inflation adjustments in former section 5. To simplify this revenue procedure, section 3 has been revised, and sections 4 and 5 have been deleted.

.02 The limitations regarding the amount of eligible long-term care premiums includible in the term "medical care" under section 213(d)(10) of the Internal Revenue Code, as enacted by section 322 of the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, 110 Stat. 1936 (1996), are adjusted for inflation for tax years beginning in 1998 (section 3.09).

.03 The value of property exempt from levy under section 6334(a)(2) (fuel, certain household items, arms for personal use, livestock, and poultry) and under section 6334(a)(3) (books and tools of a trade, business, or profession), as amended by section 502 of the Taxpayer Bill of Rights 2, Pub. L. No. 104-168, 110 Stat. 1452 (1996), is adjusted for inflation for calendar year 1998 (section 3.16).

.04 The stated dollar amount of the per diem limitation under section 7702B(d)(4), as enacted by section 321 of the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, 110 Stat. 1936 (1996), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is adjusted for inflation for calendar year 1998 (section 3.18).

SECTION 3. 1998 ADJUSTED ITEMS

.01 TAX RATE TABLES. For tax years beginning in 1998, the tax rate tables under section 1 are as follows:

         TABLE 1 - Section 1(a). -- MARRIED INDIVIDUALS FILING

 

                  JOINT RETURNS AND SURVIVING SPOUSES

 

 

      If Taxable Income Is:         The Tax Is:

 

      ____________________          __________

 

 

      Not Over $42,350              15% of the taxable income

 

 

      Over $42,350                  $6,352.50 plus 28% of

 

       but not over $102,300        the excess over $42,350

 

 

      Over $102,300                 $23,138.50 plus 31% of

 

       but not over $155,950        the excess over $102,300

 

 

      Over $155,950                 $39,770 plus 36% of

 

       but not over $278,450        the excess over $155,950

 

 

      Over $278,450                 $83,870 plus 39.6% of

 

                                    the excess over $278,450

 

 

            TABLE 2 - Section 1(b). -- HEADS OF HOUSEHOLDS

 

 

      If Taxable Income Is:         The Tax Is:

 

      ____________________          __________

 

 

      Not Over $33,950              15% of the taxable income

 

 

      Over $33,950                  $5,092.50 plus 28% of

 

       but not over $87,700         the excess over $33,950

 

 

      Over $87,700                  $20,142.50 plus 31% of

 

       but not over $142,000        the excess over $87,700

 

 

      Over $142,000                 $36,975.50 plus 36% of

 

       but not over $278,450        the excess over $142,000

 

 

      Over $278,450                 $86,097.50 plus 39.6% of

 

                                    the excess over $278,450

 

 

           TABLE 3 - Section 1(c). -- UNMARRIED INDIVIDUALS

 

        (OTHER THAN SURVIVING SPOUSES AND HEADS OF HOUSEHOLDS)

 

 

      If Taxable Income Is:         The Tax Is:

 

      ____________________          __________

 

 

      Not Over $25,350              15% of the taxable income

 

 

      Over $25,350                  $3,802.50 plus 28% of

 

       but not over $61,400         the excess over $25,350

 

 

      Over $61,400                  $13,896.50 plus 31% of

 

       but not over $128,100        the excess over $61,400

 

 

      Over $128,100                 $34,573.50 plus 36% of

 

       but not over $278,450        the excess over $128,100

 

 

      Over $278,450                 $88,699.50 plus 39.6% of

 

                                    the excess over $278,450

 

 

            TABLE 4 - Section 1(d). -- MARRIED INDIVIDUALS

 

                        FILING SEPARATE RETURNS

 

 

      If Taxable Income Is:         The Tax Is:

 

      ____________________          __________

 

 

      Not Over $21,175              15% of the taxable income

 

 

      Over $21,175                  $3,176.25 plus 28% of

 

       but not over $51,150         the excess over $21,175

 

 

      Over $51,150                  $11,569.25 plus 31% of

 

       but not over $77,975         the excess over $51,150

 

 

      Over $77,975                  $19,885 plus 36% of

 

       but not over $139,225        the excess over $77,975

 

 

      Over $139,225                 $41,935 plus 39.6% of

 

                                    the excess over $139,225

 

 

             TABLE 5 - Section 1(e). -- ESTATES AND TRUSTS

 

 

      If Taxable Income Is:         The Tax Is:

 

      ____________________          __________

 

 

      Not Over $1,700               15% of the taxable income

 

 

      Over $1,700                   $255 plus 28% of

 

       but not over $4,000          the excess over $1,700

 

 

      Over $4,000                   $899 plus 31% of

 

       but not over $6,100          the excess over $4,000

 

 

      Over $6,100                   $1,550 plus 36% of

 

       but not over $8,350          the excess over $6,100

 

 

      Over $8,350                   $2,360 plus 39.6% of

 

                                    the excess over $8,350

 

 

.02 UNEARNED INCOME OF MINOR CHILDREN TAXED AS IF PARENT'S INCOME (THE "KIDDIE TAX"). For tax years beginning in 1998, the amount in section 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $700. (This amount is the same as the $700 standard deduction amount provided in section 3.04(2) of this revenue procedure.) In the alternative, the same $700 amount is used for purposes of section 1(g)(7) (that is, determining whether a parent may elect to include a child's gross income in the parent's gross income and for calculating the "kiddie tax").

.03 EARNED INCOME TAX CREDIT.

(1) IN GENERAL. For tax years beginning in 1998, the following amounts are used to determine the earned income tax credit under section 32(b). The "earned income amount" is the amount of earned income at or above which the maximum amount of the earned income tax credit is allowed. The "threshold phaseout amount" is the amount of modified adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The "completed phaseout amount" is the amount of modified adjusted gross income (or if greater, earned income) at or above which no credit is allowed.

                Maximum                         Threshold    Completed

 

 Number        Amount of      Earned Income      Phaseout     Phaseout

 

 of Children   the Credit        Amount           Amount       Amount

 

 ___________   __________     _____________     _________    _________

 

 1              $2,271           $6,680          $12,260       $26,473

 

 2 or more      $3,756           $9,390          $12,260       $30,095

 

 None           $  341           $4,460          $ 5,570       $10,030

 

 

The Internal Revenue Service, in the instructions for the Form 1040 series, provides tables showing the amount of the earned income tax credit for each type of taxpayer.

(2) EXCESSIVE INVESTMENT INCOME. For tax years beginning in 1998, the earned income tax credit is denied under section 32(i) if the aggregate amount of certain investment income exceeds $2,300. .04 Standard Deduction.

(1) IN GENERAL. For tax years beginning in 1998, the standard deduction amounts under section 63(c)(2) are as follows:

      Filing Status                             Standard Deduction

 

      _____________                             __________________

 

 

      MARRIED INDIVIDUALS FILING JOINT RETURNS          $7,100

 

      AND SURVIVING SPOUSES (section 1(a))

 

 

      HEADS OF HOUSEHOLDS (section 1(b))                $6,250

 

 

      UNMARRIED INDIVIDUALS (OTHER THAN SURVIVING       $4,250

 

      SPOUSES AND HEADS OF HOUSEHOLDS) (section 1(c))

 

 

      MARRIED INDIVIDUALS FILING SEPARATE               $3,550

 

      RETURNS (section 1(d))

 

 

(2) DEPENDENT. For tax years beginning in 1998, the standard deduction amount under section 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer may not exceed the greater of $700, or the sum of $250 and the individual's earned income.

(3) AGED AND BLIND. For tax years beginning in 1998, the additional standard deduction amounts under section 63(f) for the aged and for the blind are $850 for each. These amounts are increased to $1,050 if the individual is also unmarried and not a surviving spouse.

.05 OVERALL LIMITATION ON ITEMIZED DEDUCTIONS. For tax years beginning in 1998, the "applicable amount" of adjusted gross income under section 68(b), above which the amount of otherwise allowable itemized deductions is reduced under section 68, is $124,500 (or $62,250 for a separate return filed by a married individual).

.06 QUALIFIED TRANSPORTATION FRINGE. For tax years beginning in 1998, the monthly limitation under section 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, is $65. The monthly limitation under section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $175.

.07 INCOME FROM UNITED STATES SAVINGS BONDS FOR TAXPAYERS WHO PAY QUALIFIED HIGHER EDUCATION EXPENSES. For tax years beginning in 1998, the exclusion under section 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $78,350 for joint returns and $52,250 for other returns. This exclusion completely phases out for modified adjusted gross income of $108,350 or more for joint returns and $67,250 or more for other returns.

.08 PERSONAL EXEMPTION.

(1) EXEMPTION AMOUNT. For tax years beginning in 1998, the personal exemption amount under section 151(d) is $2,700.

(2) PHASEOUT. For tax years beginning in 1998, the personal exemption amount begins to phase out at, and is completely phased out after, the following adjusted gross income amounts:

                             Threshold           Completed

 

      Filing Status       Phaseout Amount   Phaseout Amount After

 

      _____________       _______________   _____________________

 

 

      Code section 1(a)       $186,800             $309,300

 

      Code section 1(b)       $155,650             $278,150

 

      Code section 1(c)       $124,500             $247,000

 

      Code section 1(d)       $ 93,400             $154,650

 

 

.09 ELIGIBLE LONG-TERM CARE PREMIUMS. For tax years beginning in 1998, the limitations under section 213(d), regarding eligible long- term care premiums includible in the term "medical care," are as follows:

      Attained age before the close of the taxable year:

 

 

      40 or less                                        $

 

      210 More than 40 but not more than 50

 

      $  380 More than 50 but not more than 60          $  770

 

      More than 60 but not more than 70                 $2,050

 

      More than 70                                      $2,570

 

 

.10 TREATMENT OF DUES PAID TO AGRICULTURAL OR HORTICULTURAL ORGANIZATIONS. For tax years beginning in 1998, the limitation under section 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $109.

.11 INSUBSTANTIAL BENEFIT LIMITATIONS FOR CONTRIBUTIONS ASSOCIATED WITH CHARITABLE FUND-RAISING CAMPAIGNS.

(1) LOW COST ARTICLE. For tax years beginning in 1998, the unrelated business income of certain exempt organizations under section 513(h)(2) does not include a "low cost article" of $7.10 or less.

(2) OTHER INSUBSTANTIAL BENEFITS. For tax years beginning in 1998, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified and modified), for disregarding the value of insubstantial benefits received by a donor in return for a fully deductible charitable contribution under section 170, are $7.10, $35.50, and $71, respectively.

.12 EXPATRIATION TO AVOID TAX. For calendar year 1998, the thresholds used under section 877(a)(2), regarding whether an individual's loss of United States citizenship had the avoidance of United States taxes as one of its principal purposes, are more than $109,000 for "average annual net income tax" and $543,000 or more for "net worth."

.13 LUXURY AUTOMOBILE EXCISE TAX. For calendar year 1998, the excise tax under section 4001 and 4003 is imposed on the first retail sale of a passenger vehicle (including certain parts or accessories installed within six months of the date after the vehicle was first placed in service), to the extent the price exceeds $36,000.

.14 REPORTING EXCEPTION FOR CERTAIN EXEMPT ORGANIZATIONS WITH NONDEDUCTIBLE LOBBYING EXPENDITURES. For tax years beginning in 1998, the annual per person, family, or entity dues limitation to qualify for the reporting exception under section 6033(e)(3) (and section 4.02 of Rev. Proc. 95-35, 1995-2 C.B. 391), regarding certain exempt organizations with nondeductible lobbying expenditures, is $55 or less.

.15 NOTICE OF LARGE GIFTS RECEIVED FROM FOREIGN PERSONS. For tax years beginning in 1998, recipients of gifts from certain foreign persons may have to report these gifts under section 6039F if the aggregate value of gifts received in a taxable year exceeds $10,557.

.16 PROPERTY EXEMPT FROM LEVY. For calendar year 1998, the value of property exempt from levy under section 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) may not exceed $2,570. The value of property exempt from levy under section 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) may not exceed $1,280.

.17 ATTORNEY FEE AWARDS. For calendar year 1998, the attorney fee award limitation under section 7430(c)(1)(B)(iii) is $120 per hour.

.18 PERIODIC PAYMENTS RECEIVED UNDER QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS OR UNDER CERTAIN LIFE INSURANCE CONTRACTS. For calendar year 1998, the stated dollar amount of the per diem limitation under section 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $180.

SECTION 4. EFFECTIVE DATE

.01 GENERAL RULE. Except as provided in section 4.02, this revenue procedure applies to tax years beginning in 1998.

.02 CALENDAR YEAR RULE. This revenue procedure applies to transactions or events occurring in calendar year 1998 for purposes of section 3.12 (the expatriation tax), section 3.13 (the excise tax on luxury automobiles), section 3.16 (the value of certain property exempt from levy), section 3.17 (the hourly limit on attorney fee awards), and section 3.18 (the per diem limitation for periodic payments received under qualified long- term care insurance contracts).

SECTION 5. DRAFTING INFORMATION

The principal author of this revenue procedure is John Moran of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure, contact Mr. Moran on (202) 622-4940 (not a toll-free call).

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