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

Legislation that provides support for legal actions against individuals or organizations involved in systematic illegal activities. This act has been applied against insurance organizations ...

Investments made in a variety of securities issued by government agencies. ...

Approved or accepted policy for a particular type of risk. The only type of risk covered by a standard form mandated by law is the fire policy. In 1886, New York adopted a standard fire ...

Transfer of high severity risks through the insurance contract to protect against catastrophic occurrences. While insurance is generally not the most cost-effective means of recovery of ...

Option under a participating life insurance policy in which dividends are left on deposit with the company to accumulate at a specified interest rate. If this option is chosen, it is ...

Nominal interest rate minus the rate of inflation. ...

Provides the same coverage as a comprehensive personal liability insurance policy, plus coverage to exposures that are peculiar to farms, such as farm business operations, farm employees ...

Flow of funds out of one financial instrument, whose interest rates are low, into another financial instrument, whose interest rates are higher. In the early 1980s, insurance companies ...

Same as term Fixed Dollar Annuity: annuity that guarantees that a specific sum of money will be paid in the future, usually as monthly income, to an annuitant. For example, a $1000-a-month ...

Popular Insurance Questions