Taxpayer Relief Act of 1997


A brief overview and highlights of the tax act

  The Taxpayer Relief Act of 1997 was approved in both houses of Congress on July 31, 1997 and President Bill Clinton signed the $91 billion tax cut package on August 5, 1997.  Among the beauty in this new legislation is a meaningful capital gains tax cut which will allows American taxpayers to unlock equities and end the spiraling cycle of "investing up."  First-time home buyers will see expanded rules for Individual Retirement Accounts (IRA) and 401(k) plans, allowing penalty-free withdrawals to purchase a home.  Every two years, married sellers of principal residences (who file joint tax returns) will be allowed a $500,000 exclusion ($250,000 for singles) from capital gains tax.  Those who must pay will do so at a tax rate of 20% compared to the previous 28%.  Depreciation recapture will be 25% for sales or exchanges, and after 2000, some properties held for five years or more will qualify for an 18% capital gains rate.  There's more – a gradual increase in the estate tax exemption – from $600,000 to $1,000,000 and to $1.3 million for qualifying small businesses and family farms.  All this applies to sales or exchanges occurring after May 6, 1997.  For those operating a home business, home office deduction rules are clarified and an increase to 100% deductibility of health insurance premiums for the self-employed is promised.  Items included in the budget-balancing and tax bills (which Congress and President Clinton approved) include: overall tax relief; overall spending recommendations; and tax changes for education, child credit, tobacco, capital gains, home sales, individual retirement accounts, estate taxes, self-employed health insurance and small business.

Realtor John Calvo states, "This is the ideal 'win-win' opportunity buyers and sellers have been waiting for.  This is singlehandedly the most important tax shelter any seller could receive!"

• The above article is for information only.  Consult with a tax professional for any tax advice.


Copyright ©1998 John Calvo. All rights reserved.

John Calvo is a California licensed real estate broker associated with Lighthouse Realty Associates.  CA DRE # 01208146