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

Eligible rollover distribution that is paid directly from an employee's employee benefit insurance plan to the employee's individual retirement account (IRA) or to another plan maintained ...

Insurance coverage purchased on the same item from two or more insurance companies. ...

Same as term Unallocated Funding Instrument: pension funding agreement under which funds paid into a retirement plan are not currently allocated to purchase retirement benefits. The funds ...

Method of investing that staggers the maturities of a group of bonds. As a bond matures, the investor can reinvest the proceeds in either short- or long-term bonds depending on the interest ...

Rate applied when two or more separate buildings are insured under one policy, and/or when two or more separate contents are insured under one policy. ...

Portion of a life insurance policy cash value after the deduction of all the policyowner's indebtedness. ...

Physical handing of an insurance policy to the insured. Sales training emphasizes the importance of delivery of a policy by the agent. This develops a caring attitude on the part of the ...

Conducting of maritime suits involving ocean marine insurance policy claims before an admiralty court. ...

Type of excess of loss reinsurance in which the insurance company (cedent) cedes its known loss revenues to its reinsurer. ...

Popular Insurance Questions