• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL

Appendix C. Taxpayer Relief Act of 1997

Appendix C. Taxpayer Relief Act of 1997

The Taxpayer Relief Act of 1997 is now law and the news could bode well for many investors. The following are some of the highlights from the tax bill.

  • Reduction in capital gains tax to top rate of 20% (holding restrictions apply).

  • The first $250,000 (if single), $500,000 (if married, filing jointly) in capital gains on a home sold on or after May 7, 1997 is excluded from taxes.

    In addition, this break is available to homeowners at any age and an entirely new exemption may be possible every two years.

  • Gradual increase in the unified credit (relating to assets exempt from estate tax) from $600,000 to $1M in 2006.

  • Elimination of 15% “success” tax on large retirement plan distributions, both to the individual and his/her estate retroactive to 1/1/97.

  • Expansion of deductibility thresholds for traditional IRAs. Starting in 1998, Active Participants (covered by employer-sponsored plan) can make fully deductible contributions if the AGI is $30,000 or less for singles or $50,000 or less if married.

    Partial deductions allowed if singles AGI is between $30,000-$40,000 and for marrieds if AGI is between $50,000-$60,.000.

    Thresholds will increase annually until 2007 when thresholds will begin at $60,000 for singles and $80,000 for marrieds.

  • New “Roth” IRA that accepts only non-deductible contributions. However once the IRA is 5 years old and the owner is 59 1/2, all earnings paid are tax-free.

  • Expansion of premature-exempt distributions from both the existing traditional IRAs and the new “Roth” IRAs for first-time homebuyers, college tuition and more.

  • $400 per child tax credit for 1998, rising to $500 in 1999.

  • New Educational IRA that permits annual contributions of $500 per child under the age of 18.

  • Room and board now eligible as qualified educational expenses.



Not a subscriber?

Start A Free Trial

  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint