Calculating Taxes Under Senate Bill

For most taxpayers, figuring out their 1985 federal income tax payments under the Senate Finance Committee bill is relatively easy. Just get out your Form 1040 and follow these steps:

--Count your entire dividend income; don’t claim the exclusion now permitted.

--Count your entire capital gain as income.

--Discard your individual retirement account deduction if you’re covered by a pension plan at work.

--Discard the adjustment for employee business expenses and the deduction for a married couple when both work.

--Otherwise, figure your adjusted gross income as you did for last year.

--If you didn’t itemize your deductions, subtract $5,000 from your adjusted gross income if you filed a joint return ($3,000 if you filed a single return). Then subtract $2,000 for each personal exemption to get your taxable income.

--If you itemized deductions, discard your sales tax payments, your consumer interest payments and your miscellaneous deductions and count only those medical expenses that exceeded 10% of your new adjusted gross income. Subtract all your deductions from your adjusted gross income. Then subtract $2,000 for each personal exemption to figure your taxable income.

--Compute your tax: for joint returns, 15% of the first $29,300 of taxable income and 27% of the rest; for singles, 15% of the first $17,600 and 27% of the rest.

--Subtract from your tax the credits you took in 1985 except the one for political contributions.