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

Same as term Underwriting Gain Loss): profit ( deficit) that remains after paying claims and expenses. Insurers generate profits from underwriting and from investment income. Their chief ...

Income paid for a specified number of years from an annuity. ...

Intent to defraud. An insured is required to answer truthfully all questions on the application. The insurance company can void a contract if it would not have issued a policy had it known ...

Additional coverage to a property policy. Windstorms are not one of the standard covered perils. If an insured desires coverage for windstorms and hail, an endorsement is required. ...

Financial instrument established irrevocably for a minimum of 10 years, after which the principal reverts to the grantor upon termination of the trust. A key feature is that earnings from ...

Net cost of insurance with no markup to cover an intermediary's profit or expenses. An intermediary, such as a broker, sells an insurance product net; that is, there is no loading for his ...

Automatic right of an insured to renew a policy until a given date or age except under stated conditions. It is extremely important for the purchaser to review the conditions for renewal in ...

Method of terminating a split dollar life insurance policy in which the company transfers its interest in the life insurance policy to the insured employee. Through such a transfer, the ...

Oral or written statement that results in injuring the good name or reputation of another, causing that individual to be held in disrepute. ...

Popular Insurance Questions