Tax Reform Act of 1986
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Discussion
Many of the rules and regulations in place today are a direct result of the Tax Reform Act of 1986. The law was enacted during the presidency of Ronald Reagan and was the second large tax legislation put in place during his time in the White House. Some of the sweeping changes included:
- Reducing the top tax rate for individuals from 50% to 38.5%;
- Consolidating and simplifying many of the lower level tax brackets;
- Increased the standard deduction, personal exemption and earned income credit resulting in the removal of 6 million Americans from the income tax base;
- Removed the ability to deduct interest on consumer loans (this had a large impact);
- Restricted the IRA deduction;
- Increased the home mortgage interest deduction and added the low-income housing tax credit;
- Revised depreciation deductions;
- Increased reporting for dependents;
- Expanded the alternative minimum tax to include a greater number of taxpayers; and
- Enacted the passive activity loss rules and targeted tax shelters.
Disclosure
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.
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