THE BUDGET IMPASSE : GOP Completes Tax Cut Package
Congressional Republicans completed work on their proposed $245-billion tax cut Thursday, agreeing to broad new options for individual retirement accounts.
The package, which also includes the $500-per-child tax credit and a capital gains cut, would liberalize IRAs in key, new ways:
* For the first time, homemakers would be allowed the full, $2,000 IRA tax deduction.
* Penalty-free withdrawals would be allowed for first-home purchases, higher education costs, medical expenses and prolonged unemployment.
* Taxpayers would have the option of investing in an IRA in which the contribution is not tax-deductible, but income would be tax free if the investment lasts five years and the taxpayer is 59 1/2.
* Income limits for tax-deductible IRAs are phased up gradually to $95,000 for single taxpayers and $120,000 for couples.