Tax Relief and IRS Resolution

Taxpayer Relief Act of 1997

Created by FindLaw’s team of legal writers and editors | Last updated January 18, 2018

The Taxpayer Relief Act (TRA) of 1997 provides tax benefits that affect a broad range of taxpayers. Generally, the law lowered rates for capital gains tax; instituted a child tax credit; exempted taxation on the profits from selling a personal residence (with limits); increased the estate tax exemption; and provided for additional exemptions in other areas of the tax code.

The following is an overview of the most important provisions of the TRA. See FindLaw’s Tax Law section for more articles and resources, including Tax Exemptions and Ten Ways to Lower Your Taxes.

Reductions in Individual Capital Gains Rates

The TRA reduced capital gains tax rates in a number of different ways, including:

  • For property held over 18 months, the 20% maximum rate applies (10% for those in the 15% bracket).
  • A 25% maximum rate will apply to gains on the disposition of real estate assets otherwise eligible for the 20% rate.
  • Taxpayers in the 15% bracket are eligible for an 8% maximum rate on capital assets without marking to market property acquired before 2001.
  • The 28% maximum rate continues to apply to the sale of collectibles held for more than one year.
  • Gains from the sale of certain small business stocks held more than six months can be rolled over tax-free if the seller reinvests the proceeds in new qualifying small business stock. Also, the excluded portion is no longer subject to the alternative minimum tax.
  • Capital gains of up to $250,000 ($500,000 for joint filers) on the sale of a principal residence may be excluded from gross income every two years.
  • The alternative minimum tax capital gain rates are now the same as the new regular capital gain rates.
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