Revenue Act of 1978


The United States Revenue Act of 1978,, amended the Internal Revenue Code by reducing individual income taxes, increasing the personal exemption from $750 to $1,000, reducing corporate tax rates, increasing the standard deduction from $3,200 to $3,400, increasing the capital gains exclusion from 50 percent to 60 percent, and repealing the non-business exemption for state and local gasoline taxes.

Legislative history

The Act was passed by the 95th Congress and was signed into law by President Jimmy Carter on November 6, 1978.

Provisions

Flexible spending accounts and the 401(k) section of the IRS code

The Act also established Flexible spending accounts, which allow employees to receive reimbursement for medical expenses from untaxed income dollars. The Act added section 401 to the Internal Revenue Code. This latter provision, intended to limit executive compensation, was later used to develop one of the primary tax-advantaged retirement savings vehicles in use in the United States.