Tax Reform Act of 1986
Definition - What does Tax Reform Act of 1986 mean?
The Tax Reform Act of 1986 is a Reagan-era piece of legislation that made dramatic changes in taxation, particularly in terms of income. In the context of insurance, this act also included various changes to taxation regarding insurance. This act completely altered taxation in America and made changes to everything from capital gains taxes to the top and bottom tax rates.
Insuranceopedia explains Tax Reform Act of 1986
The Tax Reform Act of 1986 cancelled the income tax exclusion for installment payments on life insurance proceeds. It also included a number of other changes regarding insurance taxation. For example, it repealed income tax deductions for income for interest on loans for specific types of life insurance contracts. In addition to this change, this act ”repeal[ed] the deduction for contributions to protection against loss accounts of mutual property and casualty insurance companies.” In short, the Tax Reform Act of 1986 changed the way taxation occurs for insurance and set a precedent for the future in regards to this field.