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.
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.