Definition of "Tax reform act of 1986"

Katie & Jessica Bak  real estate agent

Written by

Katie & Jessica Bak elite badge icon

Front Gate Real Estate

Legislation to eliminate most tax shelters and write-offs in exchange for lower rates for both corporation and individuals. It was intended to be revenue neutral; that is, to bring in the same amount of revenue as the previous law.

  1. For individuals, it eliminated deductions for most tax shelters such as tax-advantaged limited partnerships; it eliminated special treatment for capital gains by taxing them at the same rate as ordinary income.
  2. Deductions for an INDIVIDUAL RETIREMENT ACCOUNT (IRA) no longer applied to those with incomes above $35,000 and couples above$50,000 unless they had no company pension plan. Individuals with incomes between $25,000 and $35,000 and couples between$40,000 and $50,000 got a partial deduction.
  3. For company-sponsored 401 (k) salary reduction plans, the maximum annual limit was reduced from $30,000 to $7000; antidiscrimination rules were tightened; and a 10% penalty was imposed for withdrawals before age 59/2.
  4. Other administrative changes made it more expensive for companies to start or maintain a company pension plan.
  5. CASH VALUE LIFE INSURANCE was one of the few retirement vehicles to retain its tax-deferred status.
  6. Top individual tax rates were reduced from a series of rates going up to 50% to two rates: 15% and 28%, although the top marginalrate was 33%.
  7. The top corporate rate down from 46% to 34%.
  8. The investment tax credit was eliminated and depreciation schedules were lengthened.
  9. Many industries lost special advantages they held under the old code.
  10. The alternative minimum tax was stiffened for individuals and one was added for corporations.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Latin phrase meaning "without which not," signifying a legal rule in tort and negligence cases. Under this rule, a plaintiff trying to prove that an injury was a direct result of a ...

Same as term Commutation Right: right of a beneficiary of a life insurance policy to exchange the future installments due that beneficiary for a lump sum distribution. ...

Disability in which a wage earner is forever prevented from working because of injury or illness suffered. ...

Insurance company's adjusted surplus divided by its adjusted liabilities. The greater this ratio, the greater the financial strength of the company that can be used for writing new business ...

Legislation establishing the minimum education and experience level required by the state as a prerequisite for a person to become a licensed agent. ...

Events that do not have any influence on the occurrence or nonoccurrence of another event; for example, a plane crashing in Shreveport should have no influence on a plane crashing in Dallas. ...

Same as term Graduated Life Table: mortality table that reflects irregularities from age to age due to chance fluctuations in the sequence of the rates of mortality. The rates of death as ...

Fund that contains the portion of the premium that has been paid in advance for insurance that has not yet been provided. For example, if a business pays an annual premium of $1000 on ...

Table used in calculating minimum non forfeiture values and policy reserves for ordinary life insurance policies. These tables, which give minimum values that must be guaranteed to policy ...

Popular Insurance Questions