The daily banner. (Cambridge, Md.) 1897-2008, 1921-12-12
HOW INCOME TAX CHANGES
Will AFFECT PUBLIC
Exemption Increased For Heads OF
Families With Incomes OF 5000
Or Less. Allowances For Deepen
dents Increased from $500 to $500.

To what extent will the average
taxpayer be benefited by changes in
revenue legislation? What are his
exemptions and deductions under the
revenue act of 1921 compared with
the revenue act CT 1918? Hundreds
of such questions are reaching the
Bureau of Internal Revenue. The
purpose of this article is to answer
those most frequently presented
Later, by direction of Commissioner
of Internal Revenue, David H. Blair,
there will be prepared for the press
a series of informative articles tell
ing the taxpayer in detail how to
make out his income tax return for
1921.
Probably the most important
change affecting the man of moder-
ate income is in the exemptions. I'm
der the 1921 act married man with
net income of $4,000 and less is
entitled to an exemption Of $4,000.
Under the revenue act of 1918 this
exemption was limited to $4,000.
The revenue act of 1921 also pro-
vides for each person dependent up
on the taxpayer if such person is I'M
der eighteen years of age or incapa-
BILE of self support because mental
~ or physically defective-an eXemp-
ton of $500. The exemption under
the revenue act of 1918 was 5000 for
each such dependent. Thus, mar
ried man with two dependents whose
net income for 1921 was $4,000 will
pay this year a tax of S68, compared
with $104 on the same income for
1920.
1921 Exemptions
The exemption OF $4,000 applies
also to the head OF family whose
net income for 1921 was $4,000 or
less. an increase OF $500 compared
with the 1918 act A head OF a
family, as defined by present Treasu-
ury regulations, is sc person who
actually supports and maintains IN
one household one OF moro individu-
ais who are closely connected with
him by blood relationship, relation
ship, by marriage, OF by adoption, or
whose right to exercise family con-
troll and provide for these dependents
is based upon some moral OF legal
obligation"
The normal rate of tax, 4 per cent
on tho first $4,000 Of net income
above the exemption, and per cent
on the remaining net income, re-
mains unchanged. This applies to
citizens and residents Of the United
States. Alien non-residents are tax
ed to the full per cent on income
received from sources within the
United States. Nonresident aliens
are allowed only single personal
exemption of $1,000. To overcome
the disparity in the amount of nor
NAL tax in the case of two taxpayers,
one of whom is just within the lower
$4,000 exemption, the other being
within the higher $4,000 exemption
the act provides that the reduction
of the personal exemption from
$4,000 to $4,000 shall not operate to
increase the tax, which would be pay
able if the exemption were 81 500 by
more than the net income in excess
of $4,000. For example, a married
man or head of a family has a net
income for 1921 of 5000. Assum-
ing that he has no dependents, his
tax, if he were allowed only the
$4,000 exemption, would be $12O.4O.
Under the benefits of the above pro-
vision however, his tax is S110,
per cent on the amount of his taxa
BILE income of $4,000. or $110, plus
the amount by which his net income
exceeds $1,000.
SErtaX Rates
Many inquiries are received re-
iative to the surtaX rates.
Taxpayers i'll the preparation of
their returns should be careful to
note that the surtaX rates for the
calendar year 1921 remain unchang-
ed The surtax rates on incomes for
1921 range from 1 per cent on the
amount of net income between $4,000
and Sc 900 to IS per cent on the
amount OF net income in excess of
$1,000,000. For the calendar year
1922 and each calendar year thereaf-
ter, the surtax ranges from 1 per-
cent on the amount of net income
between $4,000 and $4,000 to SO
per cent by which the amount of net
income exceeds 100000.
Returns Required
Returns are required of every sin
gle person whose net income for
1921 was $1,000 Or over, every mar
ried person not living with husband
or wife whose net income was S $1,000
and every married person living with
husband or wife whose net income
was $4,000 or over. Every person
whose gross income for the veal