A number of improvements in the rules governing Individual Retirement Accounts go into effect Jan. 1, 1982. The foremost change is the annual ceiling on contributions for which an exclusion may be claimed, which rises from $1,500 to $2,000.
The 15 percent ceiling on wages or salary is eliminated. Instead, an eligible employe may deposit all qualifying income into an IRA, subject only to the dollar ceiling -- a big break for part-time workers.
Eligibility for an IRA is extended to employes who also are covered by their employers' retirement plans (including federal, state or local government plans). The same $2,000 cap applies.
Voluntary contributions to an employer's qualified plan may also be deducted from income -- but the combined total of such contributions and deposits into a separate IRA cannot exceed the dollar ceiling.
Mandatory employe contributions under the terms of the plan do not qualify for deduction. And, of course, don't count your employer's contributions to his plan on your behalf.
Spousal IRAs continue to be allowed, with a new total ceiling of $2,250. The contributions no longer need to be split equally; you may divide the payments any way you wish -- but no more than $2,000 in either single account.
After a divorce, a person with a spousal IRA may continue to make deposits into the account from alimony received (and from income from employment), subject to some qualifying rules.
The IRA had to have been established at least five years before the year in which the decree of divorce was issued, and payments must have been made into the account for at least three of the five most recent years.
The annual ceiling on contributions after the divorce is the lesser of $1,125 or total of qualifying alimony, plus any taxable earned income.
If you are employed, you can establish a regular IRA subject to the normal rules, but total contributions into both plans for any year cannot exceed the $2,000 ceiling.
One more change: IRA funds no longer may be invested in collectibles, such as works of art, stamps, coins, antiques. But IRA investments in such items made before Dec. 31, 1981 may continue to be held. Keogh plans
Starting in 1982, the ceiling on annual contributions to a Keogh plan is doubled, going from $7,500 to $15,000. Unlike the new rules on IRAs, the limit of 15 percent of net earnings from self-employment is retained. Estates and gifts
Forget everything you've heard or learned about wills and gifts. The new law makes such sweeping changes that it is essential for everyone to take a new look at existing arrangements. Here are the major changes:
There no longer is a limited marital deduction. Beginning Jan. 1, 1982, a married individual can transfer to the spouse -- either by will or by gift -- any amount of assets, free of estate or gift tax.
So any will that includes any reference to the marital deduction will be out of date on Jan. 1. However, the law provides a transitional rule to protect existing wills from application of the unlimited marital deduction.
For an estate left to other than a surviving spouse, the amount excluded from tax goes up in annual increments from the present $175,000 level until it reaches $600,000 for deaths occurring after Jan. 1, 1987.
The concept of a unified estate and gift tax remains unchanged, so that the limits cited really apply to a consolidated total of bequests and lifetime (post-1976) gifts.
But the annual gift exclusion jumps next year, from the present $3,000 per individual to $10,000. In the case of a married couple, if both spouses agree to the gift, a total of $20,000 can be given each year to each of any number of recipients without tax consequences.
The old rule governing jointly owned property has been modified. Until now, jointly owned property belonged (for estate tax purposes) to the person who paid for it. The IRS usually imputed ownership to the first co-owner to die, and left it up to the survivor to prove otherwise.
Under the new rule effective Jan. 1, 1982, if property is jointly owned by a husband and wife, half of its value will go into the estate of the first to die without regard to who paid for it. The other half will be presumed to have belonged to the survivor and will not be included in the first estate.
This preliminary exploration of the new tax law during the past five weeks certainly isn't the last word. We'll be back to the subject from time to time as questions arise and as the Internal Revenue Service comes out with further interpretations.