The Taxpayer Relief Act of 1997 () reduced several federal taxes in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
.
Starting in 1998, a $400
tax credit for each child under age 17 was introduced, which was later increased to $500 in 1999. This credit was phased out for high-income families.
The top marginal long term
capital gains
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares ...
rate fell from 28% to 20%, subject to certain phase-in rules. The 15% bracket was lowered to 10%.
Roth IRA
A Roth IRA is an individual retirement account (IRA) under United States law that is generally not taxed upon distribution, provided certain conditions are met. The principal difference between Roth IRAs and most other tax-advantaged retirement pla ...
s were established, permanently exempting these retirement accounts from capital gains taxes.
The act permanently exempted from taxation the capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years.
The $600,000 estate tax exemption was to increase gradually to $1million by the year 2006. As inherited assets are automatically revalued to their current or
"stepped-up" basis, any capital gains are permanently exempted from taxation.
Family farms and small businesses could qualify for an exemption of $1.3million, effective 1998. Starting in 1999, the $10,000 annual gift tax exclusion was to be corrected for inflation.
The act also provided tax exemptions for retirement accounts as well as education savings in the
Hope credit and
Lifetime Learning Credit. 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
reconciliation
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Accounting
* Reconciliation (accounting)
Arts, entertainment, and media Sculpture
* ''Reconciliation'' (Josefina de Vasconcellos sculpture), a sculpture by Josefina de Vasconcellos in Coventry Cathedra ...
process.
Votes on the final version of the bill following reconciliation were as follows.
''House of Representatives''
''Senate''
The bill was signed into law by
President
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*President (corporate title)
* President (education), a leader of a college or university
* President (government title)
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Bill Clinton
William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...
on August 5, 1997, along with the
Balanced Budget Act of 1997.
References
External links
* , Taxpayer Relief Act of 1997
Pub.L. 105-34, Taxpayer Relief Act of 1997 (readable online)* , Taxpayer Relief Act of 1997
105th Congress / House / 1st session / Vote 350final vote results on H R 2014: Revenue Reconciliation Act of 1997, by various groups and by individuals, from the
Washington Post
''The Washington Post'' (also known as the ''Post'' and, informally, ''WaPo'') is an American daily newspaper published in Washington, D.C. It is the most widely circulated newspaper within the Washington metropolitan area and has a large na ...
*Mark Bautz
How a Capital-Gains Cut Will Change the Way You Invest''CNN Money'', August 1, 1997
{{US tax acts
United States federal taxation legislation
Acts of the 105th United States Congress
United States federal reconciliation legislation