This is the third installment in a three-part MoneyLine series focusing on some changes that Rhode Islanders face in the new year.

• TDI Tax: Here’s some good news for workers: The maximum tax you pay for Rhode Island’s Temporary Disability Insurance (TDI) program is going down.

The maximum tax will be $677.30 this year, down from $708.40 last year, according to figures the state Department of Labor and Training posted last month.

That’s a drop of about 4.4 percent. In dollars, it’s a drop of only $31.10. Still, every little bit helps.

The TDI tax has two key components: there’s the tax rate itself, then there’s the amount of your wages to which the tax rate is applied.

For this year, the TDI tax rate will be applied to the first $52,100 of your wages. That’s up $1,500 (about 3 percent) from last year’s cap of $50,600.

But the TDI tax rate will drop, to 1.3 percent this year, compared with 1.4 percent last year.

Thus, the maximum amount of TDI tax a worker will pay this year will be 1.3 percent of the first $52,100 in wages, for a total of $677.30.

Last year, the maximum amount of TDI tax a worker paid was 1.4 percent of the first $50,600 in wages, for a total of $708.40.

Workers who earn less than the maximum listed above will see a greater percentage savings.

For example, suppose you earn $30,000 this year, the same as last year. In that case, you’ll pay $390 in TDI tax this year, compared with $420 last year. That’s a drop of $30, or 7.1 percent.

The state Department of Labor and Training said it was able to lower the TDI tax rate for this yearbecause of a “healthier reserve” in the TDI fund.

As of Sept. 30, the TDI fund had a balance of $99.9 million, up nearly $8 million from the prior year, the agency said.

Raymond A. Filippone, the agency’s assistant director for income support, said in a statement that the increase in the fund was due partly to “higher tax receipts due to an expanding economy.” He also said that TDI benefit payments have remained stable over the year.

TDI generally provides income to workers who are unemployed because of an illness or disability that isn’t related to work. TDI generally covers most private-sector workers in Rhode Island, even if they don’t live in the state or their employers aren’t based in the state. The tax is paid only by workers, typically through payroll deduction.

• Sales Tax: When you return to shopping in the new year, look carefully at your sales slip, for you’re sure to notice a few changes.

Some things that weren’t taxed before are taxed now. Some things that were taxed before won’t be taxed any longer.

For instance, you now must pay Rhode Island’s 7-percent state sales tax on hair bows and handkerchiefs.

In a mood to sew? Buttons, fabric, lace, thread and zippers are all taxable now.

But you’ll no longer pay sales tax on shop aprons and lab coats.

What about over-the-counter drugs? They won’t be taxed. But soap, shampoo, toothpaste and mouthwash will be.

What’s going on? Rhode Island has joined a national coalition of states by adopting a set of uniform sales tax rules.

It’s technically known as the Streamlined Sales and Use Tax Agreement. The idea is to simplify and modernize sales tax laws among the various states.

But to conform to the new law, Rhode Island had to change some definitions and other rules. As a result, some things are now being taxed, others aren’t.

The new law is also intended to encourage more retailers — mainly out-of-state retailers —to collect Rhode Island sales tax on items they sell to Rhode Islanders, said state Tax Administrator David M. Sullivan.

“Now we’re going to have companies voluntarily collecting and remitting sales tax,” Sullivan said in an interview at his office in Providence.

So far, about 1,100 companies – mainly multi-state companies —have signed up, he said.

That’s a big deal, because it not only can raise revenue, but also help to level the playing field for local merchants. Here’s how:

If you buy a computer from a store in Rhode Island, the store must collect state sales tax.

If you buy a computer from a store in another state — by ordering over the phone, through a catalog or online, for example — the store may not have to collect a sales tax from you.

In that situation, you’re on the honor system: you’re supposed to pay the sales tax (technically called a “use” tax) directly to Rhode Island. The problem is that some people pay the tax, some don’t.

A state generally can’t force out-of-state retailers to collect the state’s sales tax. But if lots of states sign on to the uniform law, as Rhode Island has, maybe Congress will finally require all out-of-state vendors to collect sales taxes for each state.

Even if that never happens, the uniform law may help resolve a longstanding gripe among out-of-state retailers: Collecting sales tax for every single state is too burdensome, because sales-tax rules vary from state to state.

From a consumer’s standpoint, the new rules will take a little getting used to. The state’s sales tax rate will stay the same. But some things will be taxed, others won’t.

• Public Aid to Private Schools: Many businesses may now claim a Rhode Island tax break for contributing cash to a scholarship fund.

The scholarship fund, in turn, must distribute the money to needy students, to help them pay tuition at private elementary, middle and high schools in the state.

In effect, then, this is a way of using public funds to help pay for private education.

The credit that a business may claim can amount to 75 percent of the contribution. So if an eligible business donates $100,000 to a qualified scholarship organization, the business may be able to claim a credit of up to $75,000, said Patricia A. Thompson, former president of the Rhode Island Society of Certified Public Accountants.

If the business would otherwise owe $80,000 in Rhode Island tax, but qualifies for a $75,000 credit, the business’s tax liability is reduced to $5,000, Thompson said in an interview at Piccerelli Gilstein & Co. LLP, a CPA firm in Providence, where she is tax partner.

Among the types of businesses eligible to claim the tuition tax credit are corporations organized under Subchapter C of the Internal Revenue Code (so-called “C Corps”), as well as certain insurance companies, banks and others, Sullivan said.

In general, they may claim the credit against a variety of Rhode Island taxes, including the state’s business corporation tax, public service corporation tax, and the tax on bank deposits.

However, certain other types of businesses generally aren’t eligible, including many so-called pass-through entities, such as limited liability companies, limited liability partnerships and businesses organized under subchapter S of federal tax law (so-called “S Corps”), Thompson said. Their owners, shareholders or partners aren’t eligible, either, she said.

A number of organizations have already expressed interest in this new credit, said Michael F. Canole, chief revenue agent for the Rhode Island Division of Taxation’s personal income-tax section.

• Flat Tax: Rhode Island last year launched a big change to the state’s income-tax laws:

You may now calculate your state income tax under the regular system (with its variety of deductions, exemptions and rates), or under the new flat tax system (with no deductions or exemptions and just a single rate).

Legislation that was approved by the General Assembly and signed into law last year by Governor Carcieri made the flat-tax system retroactive to Jan. 1, 2006. The flat-tax rate for 2006 was 8 percent.

This year, the flat-tax rate is 7.5 percent; it’s scheduled to drop further in future years.

Remember that the 8-percent rate applies for 2006, so it’ll pop up on the state tax return you file this season, the one that covers 2006. The 7.5-percent rate applies for 2007, so you’ll take it into account for your quarterly estimated payments this year, and for the return you do a year from now.

Because of the way the flat-tax system works, few taxpayers will use it when calculating their state income tax for 2006; most will use the regular system instead.

Some of the state’s highest-income taxpayers normally pay Rhode Island income tax at rates high as 9.9 percent on a portion of their income; they may do better with the flat-tax system now, depending on their circumstances.

But as each year passes, more taxpayers will switch to the flat-tax calculation. Even though the flat-tax system doesn’t let you claim deductions, exemptions and most credits (and doesn’t give you favorable tax treatment on capital gains), “It still may work out for them,” Thompson said.

(The first part of this series appeared on Sunday, the second on Monday.)

Neil Downing is a Journal staff writer and author of The New IRAs and How to Make Them Work for You. Questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail:

moneyline@projo.com

Sorry, no personal replies; as many questions and issues as possible will appear here.