What significant change did the Tax Reform Act of 1986 implement regarding consumer finance?

The Tax Reform Act of 1986 made significant changes to the tax treatment of consumer finance by abolishing deductions for consumer finance interest. This meant that taxpayers could no longer deduct interest paid on personal loans or credit card debt from their taxable income, which impacted consumers looking for tax relief through financing costs.

This change was part of a broader effort to simplify the tax code and reduce the tax advantages associated with consumer debt. By eliminating these deductions, the Act aimed to encourage sound financial practices and reduce reliance on debt. The focus shifted more towards investment in home ownership and business investments, which were still incentivized.

The other choices presented are not accurate in reflecting the provisions of the Tax Reform Act of 1986, as they suggest either maintaining or increasing deductions for various types of loans, which was contrary to the direction taken by the Act. Overall, the abolishment of consumer finance interest deductions represented a significant shift in how personal debt was treated in the tax context.