Taxpayer Relief Act of 1997
Encyclopedia
The Taxpayer Relief Act of 1997 reduced several federal taxes in the United States
.
Subject to certain phase-in rules, the top capital gains rate fell from 28% to 20%. The 15% bracket was lowered to 10%.
Starting in 1998, a $400 tax credit for each child under age 17 was introduced, which was increased to $500 in 1999. This credit was phased out for high income families.
The act exempted from taxation the profits on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This is for residences that were lived in for at least 2 years over the last 5 (ref). See also Internal Revenue Code section 1031
which is a way to sell a (non personal residence) property and not have to pay capital gains tax (at least immediately). Basically, if you have a personal residence, you cannot use a 1031 to defer the capital gains, you have to use this act, but don't have to pay capital gains at all for up to the above amounts. If it's a rental then you have to use a 1031 exchange if you want to defer capital gains taxes indefinitely.
The $600,000 estate tax exemption was to increase gradually to $1 million by the year 2006.
Family farms and small businesses could qualify for an exemption of $1.3 million, effective 1998. Starting in 1999, the $10,000 annual gift tax exclusion was to be corrected for inflation.
The act also provided tax relief for retirement accounts as well as education savings in the Hope Scholarship Credit
and Lifetime Learning Credit
s. Some expiring business tax provisions were extended.
process.
Final House vote, July 30, 1997:
Final Senate vote, July 30, 1997:
It was signed into law by President
Bill Clinton
on August 5, 1997.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Subject to certain phase-in rules, the top capital gains rate fell from 28% to 20%. The 15% bracket was lowered to 10%.
Starting in 1998, a $400 tax credit for each child under age 17 was introduced, which was increased to $500 in 1999. This credit was phased out for high income families.
The act exempted from taxation the profits on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This is for residences that were lived in for at least 2 years over the last 5 (ref). See also Internal Revenue Code section 1031
Internal Revenue Code section 1031
Under Section 1031 of the United States Internal Revenue Code , the exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.-Summary:...
which is a way to sell a (non personal residence) property and not have to pay capital gains tax (at least immediately). Basically, if you have a personal residence, you cannot use a 1031 to defer the capital gains, you have to use this act, but don't have to pay capital gains at all for up to the above amounts. If it's a rental then you have to use a 1031 exchange if you want to defer capital gains taxes indefinitely.
The $600,000 estate tax exemption was to increase gradually to $1 million by the year 2006.
Family farms and small businesses could qualify for an exemption of $1.3 million, effective 1998. Starting in 1999, the $10,000 annual gift tax exclusion was to be corrected for inflation.
The act also provided tax relief for retirement accounts as well as education savings in the Hope Scholarship Credit
Hope Scholarship Credit
The Hope credit, provided by , is available to taxpayers who have incurred expenses related to the first two years of postsecondary education. For this credit to be claimed by a taxpayer, the student must attend school on at least a part-time basis...
and Lifetime Learning Credit
Lifetime Learning Credit
The Lifetime Learning Credit, provided by , is available to taxpayers who have incurred education expenses. For this credit to be claimed by a taxpayer, the student must attend school on at least a part-time basis...
s. Some expiring business tax provisions were extended.
Legislative history
This was the first law devoted solely to tax cuts that Congress enacted using the fast-track budget reconciliationReconciliation (Senate)
Reconciliation is a legislative process of the United States Senate intended to allow consideration of a budget bill with debate limited to twenty hours under Senate Rules...
process.
Final House vote, July 30, 1997:
| Vote by Party | Yea | Nay | ||
|---|---|---|---|---|
| Republicans | 225 | 99.6% | 1 | 0.4% |
| Democrats | 164 | 80.0% | 41 | 20.0% |
| Independents | 0 | 0.0% | 1 | 100% |
| Total | 389 | 90.0% | 43 | 10.0% |
| Not voting | 2 | 1 |
Final Senate vote, July 30, 1997:
| Vote by Party | Yea | Nay | ||
|---|---|---|---|---|
| Republicans | 55 | 100% | 0 | 0.0% |
| Democrats | 37 | 82.2% | 8 | 17.8% |
| Total | 92 | 92.0% | 8 | 8.0% |
It was signed into law by President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
on August 5, 1997.
External links
, Taxpayer Relief Act of 1997, Taxpayer Relief Act of 1997- 105th Congress / House / 1st session / Vote 350 final vote results on H R 2014: Revenue Reconciliation Act of 1997, by various groups and by individuals, from the Washington Post
- Mark Bautz, How a Capital-Gains Cut Will Change the Way You Invest CNN Money, August 1, 1997