The Taxpayer Relief Act of 1997 contains the biggest tax cuts passed by Congress since the 1970s. To cover the extensive changes made by this tax law, this column will appear twice a month through year end.

The new law contains many miscellaneous changes which we will review today.

Charitable Remainder Trusts The old law (which expired May, 1997) allowed an individual to give a gift of appreciated stock to a private foundation and obtain a charitable deduction for the full fair market value. Congress retroactively extended that law from June 1, 1997 to June 30, 1998.

Mileage Rates for Charitable Contributions Beginning in 1998, the mileage rate is increased to 14 cents a mile for use of your personal automobile while performing charitable work.

Estimated Tax Payments A "safe harbour'' for avoiding the imposition of penalties for the underpayment of estimated income taxes was to make a minimum payment equal to 100 percent of the prior year tax liability. For some illogical reason, the percentage has been changed as follows: Year % 1997 110 1998 100 1999-2001 105 2002 112 2003 110 Standard Deduction for Dependents The standard deduction for a high school or college age child who worked during the summer and who was claimed as a dependent on the parents tax return was limited. Under the new law the basic standard deduction will equal the lesser of the basic standard deduction (1998-$4,250) or the greater of $500 (1998-$700) or the child's earned income plus $250.

Home Office Deduction The availability to take a deduction for an office in the home has been expanded. The new law expands the definition of a principal place of business to include a home office if: (1) The office is used to conduct administrative or management activities of the taxpayers trade or business; and (2) There is no other fixed location where the individual conducts substantial administrative or management activities. This will also allow many individuals to deduct the cost of travelling between their homes and another location where they conduct business. This legislation effectively overturns at 1993 Supreme Court decision which limited the availability of taking a deduction for a home office. This change is effective in 1999.

Business Meals Under old law, only 50 percent of the cost of a business meal could be taken as a tax deduction. The new law will increase the deductible amount by five percent every two years until it reaches 80% in 2008.

Health Insurance for Self Employed Individuals The deduction of health insurance premiums paid by self-employed individuals will be gradually increased from 40 percent in 1997 to 100 percent in 2007.

Interest on Education Loans Beginning in 1998, an individual will be able to deduct the interest expense on an education loan. The maximum amount of interest deductible will rise from $1,000 in 1998 by $500 each year until the maximum of $2,500 is reached in 201. The deduction is limited to interest paid during the first 60 months in which the interest is required to be paid. Fairly detailed regulations define what is a qualified loan (borrowing from a family member is not within the definition) and the deduction is phased out when an individuals adjusted gross income is between $40,000 and $55,000 (single taxpayers) and $60,000 to $75,000 (married taxpayers). The deduction is similar to an IRA in that it reduces gross income and can be taken in addition to the standard or itemised deduction.

The preceding is a summary of a complex tax legislation that contains multiple effective dates and phase-in rules. The tax advice given in this column is, by necessity, general in nature. You should, of course, check with your own US tax consultant about how specific transactions affect you since tax advice varies with individuals circumstances.

James Paul Sabo, CPA, is the president of Expatriate Tax Services LLC, P.O.

Box 617, Bernardsville, New Jersey and is associated with Gulfstream Financial Ltd. in Bermuda.