The effect of the Tax Reform Act of 1986 on itemized deductions
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On October 22, 1986, President Ronald Reagan signed into law the Tax Reform Act of 1986. The act is a historical document that makes the most sweeping changes to the Internal Revenue Code since its inception in 1913. In effect, the Act will rewrite the Internal Revenue Code and will affect each and every individual who pays a Federal income tax. The purpose of the Act is trifold. First, the act aims to make the tax system simpler by eliminating certain deductions and reducing the need for recordkeeping. Second, the Act aims to make the tax system fairer, whereby individuals with relatively equal amounts of income will have relatively similar tax liabilities. Finally, the Act aims to ensure a more efficient tax system by encouraging individuals to base their investment decisions on economic factors rather than merely tax factors. The basic underlying goal of the Act is to increase taxable income through the elimination of certain deductions and to decrease the tax rates.