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

Health insurance coverage only for a specified catastrophic disease such as cancer. It is important to ascertain the waiting period required, maximum benefits and maximum length of time ...

Rights and duties of an insured as a prerequisite for collecting benefits. For example, in the event of property damage, the insured may be required to submit proof of loss to the insurance ...

Cost of doing business, not including pure expectation of loss. ...

Federal law that requires administrators of pension plans with more than 25 participants to file a plan description with the U.S. Department of Labor. A plan description includes schedules ...

Device that enables the health maintenance organization (HMO) to present a premium quotation to the employer that would encourage the employer to replace the current health carrier. The POS ...

Proportion of losses incurred to premiums earned. This ratio indicates the amount of a premium dollar that is being consumed by losses. ...

Method of underwriting insurance in which the insurance company utilizes regular mortality tables without additions for abnormalities. ...

Correction of a contract containing a mistake in order to prevent a party to that contract from gaining from that mistake. For example, if $1,000,000, instead of the correct amount of ...

Synopsis of the key financial figures concerning the pension plan that is contained in the form 5500 that must be filed annually with the Internal Revenue Service. This report must be given ...

Popular Insurance Questions