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 WASHINGTON, Jan. 3 /PRNewswire/ -- Devising and implementing effective tax strategies is the only absolute means to ensure individuals pay no more in taxes than necessary, according to Price Waterhouse.
 And with the passing of the Omnibus Budget Reconciliation Act of 1993, the numerous changes that took hold Jan. 1 "call for extremely careful tax planning," said Bonnie Orleans, a Price Waterhouse tax adviser.
 Among the many changes for individual taxpayers are:
 -- Effective Jan. 1, 1993, income tax rates for individuals
 increased adding a fourth bracket with a 36 percent rate and a
 10 percent surtax that results in a tax rate of 39.6 percent on
 taxable incomes over $250,000.
 -- The standard deduction has increased to:
 Married filing jointly $6,200
 Single $3,700
 Head of household $5,450
 Married filing separately $3,100
 The personal exemption amount claimed in 1993 is $2,350.
 -- The maximum pre-tax contribution one can make to a 401(k) plan
 has been indexed to $8,994, up from $8,728 in 1992.
 -- Beginning in 1994, the dollar cap on wages and self-employment
 income subject to the Medicare Hospital Insurance tax has been
 "So how does one go about trimming their tax liability?" Orleans asks.
 "For starters, some may find it useful to adopt a strategy of accelerating income or deferring deductions."
 This applies to those affected by the repeal of the Medicare hospital insurance wages base cap who could benefit from an acceleration of discretionary wage income such as stock options or bonuses into 1993 from 1994.
 By accelerating income, individuals will avoid the 1.45 percent hospital insurance tax if over the 1993 cap of $135,000.
 Orleans cautions individuals to be careful, however, and remember to factor in the time value of money into their 1993-1994 analysis when considering this strategy.
 People in a low tax bracket in 1993 who expect to be in a higher tax bracket in 1994 may also benefit by accelerating income into 1993 and deferring deductions to 1994.
 An opposing strategy -- deferring income and accelerating deductions -- is yet another option that may be appropriate for most individuals, Orleans said.
 These strategies are not tried and true for everyone, she said. "It's always wise to run the numbers and consider whether accelerating income and deferring deductions, or vice versa, will be beneficial," she said.
 For example, if an individual's taxable income in 1993 was abnormally low, accelerating income and deferring deductions may work best depending on the individuals anticipated top federal tax rate for 1993 and 1994.
 "An in-depth assessment of individual circumstances is the best way to determine which strategy will produce a tax savings, taking into account the impact of the tax rates that apply each year."
 Price Waterhouse is committed to providing the ideas, information and advice that will help clients make better business decisions. Through a global network of firms practicing in 117 countries and territories, Price Waterhouse employees work together to provide accounting, auditing, tax planning and compliance, management and technology consulting, litigation support and business advisory services to corporations, individuals, nonprofit organizations, and government departments and agencies. The U.S. firm, with 106 offices and 12,995 men and women, is a vital part of the Price Waterhouse worldwide network.
 -0- 1/3/94
 /NOTE TO EDITORS: For an interview opportunity with a Price Waterhouse tax professional or for further information, please call the contact below./
 /CONTACT: Betsy L. Freeman, marketing communications manager of Price Waterhouse, 202-728-9781/

CO: Price Waterhouse ST: District of Columbia IN: FIN SU: ACC

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Publication:PR Newswire
Date:Jan 3, 1994

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