Taxpayer Relief Act Of 1997
Categories: Tax, Regulations
The Big Betty of tax breaks, one of the largest tax cuts in U.S. history: the Taxpayer Relief Act of 1997.
Signed into law by Clinton, the act introduced the Child Tax Credit, a $400 tax credit for every minor in 1998 (and $500 a pop in 1999...except for the super-rich).
The act also cut long-term (1+ year) capital gains rates by 8%, making it 20%. That means you got to keep 8% more money from investments when you cash out on them.
Ever heard of those little things called Roth IRAs? Well, they were established under the Taxpayer Relief Act of 1997. Unlike traditional IRAs, Roth IRA contributions are not tax-deductible. However, you don’t have to pay capital gains taxes on any of your Roth IRA income when you take it out later in retirement. Additionally, you can take out the direct contributions to your Roth IRA with no penalty at any time (just the principle...not the interest). So, yeah. It's a big deal.
Thanks to the Taxpayer Relief Act of 1997, you could also be exempt from capital gains taxes when selling a residence of up to $500 for couples and half that for singles, assuming you lived in the place for at least two of the last five years.
The estate tax exemption, which was already $600k, rose to $1 million by 2006, and family farms and small businesses got exemptions, too.
Tax cuts...and drinks...all around. We’ll leave that growing national debt to the kiddos.
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Finance: What is the Tax Reform Act of 1...4 Views
Finance a la shmoop what is the Tax Reform Act of 1986 ah it was a simpler
time Democrats and Republicans working [Politicians jumping up and down]
together shaking hands across the aisle then sharing mistresses well the tax
reform act of 86 was the on-court - the act of 81 wherein Ronald Reagan moved to [Reagan appears]
dramatically simplify tax codes he cut taxes but somehow these cuts were to be
revenue-neutral to the taxman and go figure that one like cutting taxes would [Revenue forms cut in half]
stimulate business which it did which then generates more income which is then
taxed more something like that that's the logic anyway well a big theme of
these tax cuts was to shift the burden from individuals paying very high
marginal tax rates Thank You comrade Jimmy Carter to corporations many of [Jimmy Carter in office]
which had found loopholes so that billions of dollars were avoided in
paying taxes kind of like today's Apple and Google basing themselves in Ireland
and individuals paid with their liver and lungs in those days comrade Carter [Man holding liver at hospital desk]
had imposed a 50% plus top rate which kicked in at a relatively low dollar
level like you were wealthy if you earned more than a hundred grand a year
today's dollar adjusted Reagan brought that top rate down to 38 percent on its [Man bumps into Reagan]
way over time down to 28% and consolidated 15 different break points
in tax to being just four and yes the people at H&R Block wept they'd had it
great with the complex Carter era accounting gravy train there well a ton [Person dealing cash]
of other things were simplified and codified with the theme being that the
new IRS was gonna go after you if you didn't pay up it's like they're cutting [Woman running in woods screaming]
your fees so you better at least pay the low rates here these days on taxes yeah
and audit volumes increased dramatically why?
well since taxes were now so much easier to pay you'd better stop finding lies in
trickery and other deceitful ways to avoid paying you're legally owed
obligations luckily this tax reform act clarified and finalized resource
allocation debates as driven by taxes forever so that after 1986 while there
were no more debate about tax changes and everything from [Red siren alarm appears]
there forward for the next few hundred years won't need to change a lick oh
wait actually the opposite is happening always [Politicians boxing each other]