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Old-Age Benefits. Under most circumstances, the bill exempts from taxes the profit realized by a taxpayer 65 or over on the sale of a home in which he has lived at least five of the preceding eight years. In the past, all such profits have been subject to capital-gains taxation unless reinvested in a new home. The bill increases from the present $1,524 to $2,286 the amount of investment income against which any elderly married taxpayer may claim retirement tax credit. It also exempts taxpayers 65 or over from the rule limiting deductions for drugs and medicines to the extent that they exceed 1% of income. Younger taxpayers who pay such expenses for elderly parents will be exempt too. The elderly are already exempt from the rule limiting deductions for doctor bills and other medical expenses to amounts in excess of 3% of income.
Sick Pay. An employee who receives full pay while sick may no longer deduct such income unless he is ill more than 30 days. Then, as under the present law, he may claim up to $100 weekly. If sick pay is less than 75% of regular weekly wages, however, an employee may deduct a maximum $75 weekly at once, if he is hospitalized, and after one week if he is at home.
Child-Care Expense. The maximum deduction for care of children by a taxpayer who must work is raised from the present $600 to $900, but only if there are two or more children. The maximum age of children for whom such deductions may be claimed is raised from the present eleven years to twelve years.
Casualty Losses. Such uninsured losses as auto damage or vandalism at a summer home, now fully deductible, will be deductible only to the extent that the loss exceeds $100. The provision is designed to eliminate deductions for fender-bender accidents and the like.
Income Averaging. Artists, authors, actors and others, whose fat years often alternate with the lean, will be allowed to average out their earnings over five years for a better tax break. For example, under the old law an unmarried author who makes only $3,000 in each of four successive years and then takes in $44,000 during a fat fifth year would owe $18,990 in taxes under the old law. Under the new law he would owe $11,390.
Group Insurance. Company-paid premiums to provide group term life insurance in excess of $50,000 for a single individual will be treated as regular income of the insured and taxed as such.
Earnings Abroad. The ceiling on tax-free earnings of Americans who have lived abroad more than three years will be lowered from $35,000 to $25,000. Those who have lived abroad for a shorter period may still claim up to $20,000 annually in tax-free income.
Capital Losses. Large losses may be carried forward indefinitely to be written off in amounts of $1,000 each year against regular income. Under the present law, capital loss could be carried forward for only five years.
Dividend Credits. Stockholder credits against taxable income, which under the old law allow a single taxpayer to deduct the first $50 in dividends and a married couple the first $100, will be doubled to $100 and $200. A second provision, which allows stockholders to deduct another 4% of total dividend income from final taxes payable, will be repealed in two yearly stages.