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

Membership organization representing professional actuaries in all insurance fields in Canada including life and health, casualty, consulting and fraternal actuaries. A member must reside ...

Organization formed to encourage research in insurance and to foster an exchange of ideas and research methodology among the society members. ...

INSURANCE health insurance policy providing coverage for an insured's medical expenses except those that are specifically excluded. This may be the most advantageous medical expense policy ...

Trust named from a private-letter ruling by the IRS that involved a trust established by a Jewish congregation on behalf of its rabbi. The operation of the trust involves the employer's ...

Bonds issued by the United States Treasury that earn a fixed interest rate plus the rate of inflation. These bonds are sold at face value in denominations of $50 up to $5000 and may earn ...

Activities of interest in underwriting an application for life insurance to determine the rate classification (premium) for the applicant. For example, a sky diver is at greater personal ...

Documents completed by the agent to effect authorization to act on behalf of the company. ...

Automobile purchased or leased by the insured or the insured's spouse that is in addition to the insured or the insured spouse's present car as covered under the personal automobile policy ...

In property insurance, amount that an insured does not have to pay when a loss exceeds a predetermined sum; here the insurance company pays more than 100% of the loss, so that the ...

Popular Insurance Questions