Irs Mails Out 1997 Tax Forms

In an annual symbol that ends holiday revelry and marks a return to reality, the Internal Revenue Service on Friday began mailing out its 1997 federal income tax forms.

Most people should get their packages by next week.

About 26 million packages will have no forms, just instructions for people to use TeleFile, the file-by-phone method used by nearly 5 million filers last year.

This year’s tax forms vary only slightly from the 1996 version. Most of the major changes in the tax code incorporated in the balanced budget deal worked out between President Clinton and Congress last year don’t go into effect until the 1998 tax year.

The Form 1040 adds two new lines, one for a medical savings account deduction and the other for adoption credit, both resulting from 1996 legislation.

But it does require taxpayers with capital gains to use Schedule D of Form 1040 to take advantage of changes in capital gains rates that did take effect in 1997.

The top tax rates on capital gains are lower for most transactions. The new rate for most gains is 20 percent, down from 28 percent.

Among other changes:

Up to $250,000 of gains from the sale of a residence after May 6 may be excluded ($500,000 on a joint return) if the taxpayer has owned and used the home as a principal residence for two of the five previous years.

On a joint return, up to $2,000 of earnings may be contributed to each spouse’s tax-deductible individual retirement account, or IRA. Previously, if only one spouse had earned income, the total contributions were limited to $2,250.

Self-employed people may deduct up to 40 percent of their health insurance premiums for every month they were not eligible to participate in an employer-sponsored health plan.

The IRS said this year it is expanding its free telephone assistance service to 16 hours a day, six days a week. That service is available at 1-800-829-1040.