In yesterday's Style Plus story about "cashing in" on the new tax bill, two suggested tax-deductible actions required clarification. Even if you make 1982 mortgage payments in 1981, tax law permits you to deduct from your 1981 taxes only the interest "properly allocable to that period" (1981). Federal income tax is not deductible.

If you've been planning to get your teeth capped, contribute to charity or repair rental property -- do it now. If you've been thinking about giving a substantial gift, taking money from a profit-sharing plan or dying -- wait until next year.

These are some suggestions, offered by financial experts, for those who want to cash in on the new tax bill President Reagan signed into law last week. If you're unsure how it may affect you, you're not alone. Advisers report being "swamped" with inquiries.

"In my experience," says Sam Murray, tax manager for Arthur Andersen & Co. in Washington, "this bill has elicited more inquiries than any other tax bill I've been associated with.

"I think that's because it represents a major new philosophical change in direction . . . that means major cuts in taxes for individuals and tremendous cuts for business."

Some confusion stems from the "phasing in" of specific provisions, says Washington financial planner Alexandra Armstrong. "Many people don't realize," she notes, "that some new provisions won't take effect until 1983 or later."

While much of the public's attention has been focused on income tax cuts, which start in October, "don't wait until then to take action," advises accountant/attorney Herbert J. Lerner of Ernst & Whinney. "Individuals can start to rework their financial plans now to make the most of the opportunities created by the new law."

Here is some of the experts' advice concerning tax changes affecting "the average Washingtonian":


Withholding taxes will be cut 5 percent on Oct. 1, 1981; 10 percent on July 1, 1982 and 10 percent on July 1, 1983. After 1984, tax schedules will be adjusted for inflation.

"So an obvious move," says Lerner, "is to maximize 1981 deductions and shift income to 1982 or later."

Among the tax-deductible actions individuals might take before the new year are incurring medical and dental expenses, selling a security for a loss, contributing to charity and pre-paying estimated federal income taxes and some 1982 mortgage payments.

Income that could be deferred to next year -- when the tax bite will be lower -- may include taking money from a profit-sharing or retirement plan and buying bonds that don't pay until 1982. Consider taking money out of a money-market mutual fund and putting it into a six-month certificate of deposit or Treasury Bill, which will mature and pay interest in 1982.


The "biggest break" for most Washington-area taxpayers are the provisions that encourage savings for retirement, according to Armstrong. "Setting up an Individual Retirement Account," she says, "is one of the first things people should do."

The old law restricted IRAs to workers whose employers didn't have pension plans. But the new law permits anyone to set up an IRA -- or contribute to their employer's qualified plan -- and deposit up to $2,000 per year tax-free.

The law also increases the allowable deductions for a Keogh plan (retirement savings for self-employed persons) to the lesser of $15,000 or 15 percent of self-employed income.

"Even if you have a pension plan," says Armstrong, "an IRA is probably worth it." Both IRAs and Keoghs, she notes, "permit you to accrue money tax-free, and deduct that contribution from your federal income tax. Which makes them one of the best tax shelters around."

For example, a dual-income couple in the 40 percent tax bracket (about $33,000 of taxable income or $45,000 gross income) who puts aside $1,000 per year in an IRA or Keogh account at 8 percent interest for 25 years will accrue $78,951.

If that same couple put that same money in a savings account with 8 percent interest, over 25 years they would accrue just $29,195. (If you withdraw money early -- before age 591/2 -- from an IRA or Keogh account, you suffer a sizable penalty.)

The desirability of setting up an IRA account will spark "a tremendous marketing endeavor by banks, insurance companies, mutual funds," predicts New York accountant William L. Raby, chairman of the federal tax division of the American Institute of Certified Public Accounts.

"I think we're going to see a stock market boom," says Raby, who predicts the highest-yield IRA will be with a no-load mutual fund invested in stocks and bonds.

The best kind of IRA "depends on the individual," says Murray. To select one, he advises exploring plans offered by brokerage houses, savings and loans, banks and insurance agents. "If at that point you're still confused," he says, "turn to an accountant or independent investment counselor for help."


"Beginning in 1982, property given or willed to a spouse will be free of tax," notes attorney Jerry J. McCoy, executive editor of the Estates, Gifts and Trusts Journal. "That's true if you leave an estate of $10,000 or $10 billion."

The surviving spouse's estate, however, will be subject to tax -- unless he or she wills it to charity or remarries and wills it to the new spouse. That tax rate will be reduced by the new law, so that by 1987, less than 1 percent of all estates will be subject to tax.

Those who want to reduce their estate through gifts to relatives and friends, says McCoy, "will find it easier to do so under the new law. Beginning in 1982 an individual will be able to give $10,000 (up from $3,000) tax free. Gifts made by paying for tuition or for medical care will not be subject to tax."

While some people think these changes mean they can forget about estate planning, says McCoy, "people need to plan now more than ever. Virtually everyone should re-examine their will."


The new law provides partial relief for the "marriage penalty" -- an inequity in the tax schedules that requires two-earner married couples to pay more income tax than if each spouse were single.

Starting in 1982, the lower-income spouse can deduct 5 percent of his or her earnings up to $1,500. In 1983, the deduction will be 10 percent of that spouse's earned income up to $3,000.

This deduction reduces the penalty substantially for couples earning up to $50,000 where one spouse earns 70 percent of the family income and the other spouse earns 30 percent. As under the current law, however, when the incomes of both spouses become more equal, the marriage penalty will still occur, but with less severity.


"Many people will want to purchase the new tax-exempt savings certificates that will be issued beginning in October," Armstrong says. These "all-savers" certificates will pay 70 percent of the average yield of the one-year Treasury bill and must have a one-year maturity.

Up to $1,000 in interest earned on certificates purchased before Dec. 31, 1982, but paid after that date, will be tax-free. Small savers will be able to obtain these certificates issued in $500 denominations.


People age 55 and older who sold their principle residence after July 20, 1981, are allowed a one-time exclusion of gain up to $125,000. The prior limit was $100,000.

Taxpayers who sell their principle residence will now have two years rather than 18 months before being subject to capital-gains tax if they "roll over" sales proceeds into a new residence.


Under the new law:

The maximum child-care credit will be increased to $720 for one child and $1,440 for two or more.

Americans working abroad may exclude annually $75,000 of foreign earned income in 1982, increasing by $5,000 per year until Jan. 1, 1986.

There will be higher interest rates for late taxes, and stiffer penalties for filing a false W-4 (deductions form filed with employer).

Employe stock options will again receive some favorable tax treatment.

Free summaries of the Economic Recovery Tax Act of 1981 are available from Ernst & Whinney, 1225 Connecticut Ave., NW, call Jeanne Wilson, 862-6170; and Arthur Andersen & Co., director of Communications, 69 W. Washington St., Chicago, Ill. 60602.