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TAX EXPENDITURES

The Congressional Budget Act of 1974 (Public Law 93–344) requires that a list of “tax expenditures’’ be included in the 

budget. Tax expenditures are defined in the law as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, 

or a deferral of tax liability.’’ These exceptions may be viewed as alternatives to other policy instruments, such as spending or 

regulatory programs.

Identification and measurement of tax expenditures depends crucially on the baseline tax system against which the actual tax 

system is compared. The tax expenditure estimates presented in this document are patterned on a comprehensive income tax, 

which defines income as the sum of consumption and the change in net wealth in a given period of time. 

An important assumption underlying each tax expenditure estimate reported below is that other parts of the Tax Code remain unchanged. The estimates would be different if tax expenditures were changed simultaneously because of potential interactions among provisions. For that reason, this document does not present a grand total for the estimated tax expenditures.

Tax expenditures relating to the individual and corporate income taxes are estimated for fiscal years 2021–2031 using two 

methods of accounting: current tax receipt effects and present value effects. The present value approach provides estimates of 

the receipt effects for tax expenditures that generally involve deferrals of tax payments into the future.

TAX EXPENDITURES IN THE INCOME TAX

Tax Expenditure Estimates

All tax expenditure estimates and descriptions presented here are based upon current tax law enacted as of July 31, 2021,

and reflect the economic assumptions from the Midsession Review of the Fiscal Year 2022 Budget. In some cases, expired or 

repealed provisions are listed if their tax receipt effects occur in fiscal year 2021 or later. 

The total receipt effects for tax expenditures for fiscal years 2021–2031 are displayed according to the Budget’s functional 

categories in Table 1. Descriptions of the specific tax expenditure provisions follow the discussion of general features of the tax 

expenditure concept.

Two baseline concepts—the normal tax baseline and the reference tax law baseline—are used to identify and estimate tax 

expenditures.1 For the most part, the two concepts coincide. However, items treated as tax expenditures under the normal tax 

baseline, but not the reference tax law baseline, are indicated by the designation “normal tax method’’ in the tables. The receipt

effects for these items are zero using the reference tax law. The alternative baseline concepts are discussed in detail below.

Tables 2A and 2B report separately the respective portions of the total receipt effects that arise under the individual and corporate income taxes. The location of the estimates under the individual and corporate headings does not imply that these categories of filers benefit from the special tax provisions in proportion to the respective tax expenditure amounts shown. Rather, 

these breakdowns show the form of tax liability that the various provisions affect. The ultimate beneficiaries of corporate tax 

expenditures could be shareholders, employees, customers, or other providers of capital, depending on economic forces.

Table 3 ranks the major tax expenditures by the size of their 2022–2031 receipt effect. The first column provides the number 

of the provision in order to cross reference this table to Tables 1, 2A, and 2B, as well as to the descriptions below. 

Interpreting Tax Expenditure Estimates

The estimates shown for individual tax expenditures in Tables 1 through 3 do not necessarily equal the increase in Federal 

receipts (or the change in the budget balance) that would result from repealing these special provisions, for the following reasons.

First, eliminating a tax expenditure may have incentive effects that alter economic behavior. These incentives can affect the 

resulting magnitudes of the activity, or the consequences of other tax provisions or Government programs. For example, if capital gains were taxed at higher ordinary income tax rates, capital gain realizations would be expected to decline, which could 

result in lower tax receipts depending on the elasticity of the capital gains tax rates. Such behavioral effects are not reflected in 

1 These baseline concepts are thoroughly discussed in Special Analysis G of the 1985 Budget, where the former is referred to as the pre-1983 method and the 

latter the post-1982 method.
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the estimates.

Second, tax expenditures are interdependent even without incentive effects. Repeal of a tax expenditure provision can 

increase or decrease the tax receipts associated with other provisions. For example, even if behavior does not change, 

repeal of an itemized deduction could increase the receipt costs from other deductions because some taxpayers would be 

moved into higher tax brackets. Alternatively, repeal of an itemized deduction could lower the receipt cost from other 

deductions if taxpayers are led to claim the standard deduction instead of itemizing. Similarly, if two provisions were 

repealed simultaneously, the increase in tax liability could be greater or less than the sum of the two separate tax expenditures, because each is estimated assuming that the other remains in force. In addition, the estimates reported in 

Table 1 are the totals of individual and corporate income tax receipt effects reported in Tables 2A and 2B, and do not 

reflect any possible interactions between individual and corporate income tax receipts. For this reason, the estimates in 

Table 1 should be regarded as approximations.

Present-Value Estimates

The annual value of tax expenditures for tax deferrals is reported on a cash basis in all tables except Table 4. Cash-based estimates reflect the difference between taxes deferred in the current year and incoming receipts that are received due to deferrals 

of taxes from prior years. Although such estimates are useful as a measure of cash flows into the Government, they do not accurately reflect the true economic cost of these provisions. For example, for a provision where activity levels have changed over 

time, so that incoming tax receipts from past deferrals are greater than deferred receipts from new activity, the cash-basis tax 

expenditure estimate can be negative, despite the fact that in present-value terms current deferrals have a real cost to the Government (i.e., taxpayers). Alternatively, in the case of a newly enacted deferral provision, a cash-based estimate can overstate 

the real effect on receipts to the Government because the newly deferred taxes will ultimately be received. 

Discounted present-value estimates of receipt effects are presented in Table 4 for certain provisions that involve tax deferrals 

or other long-term receipt effects. These estimates complement the cash-based tax expenditure estimates presented in the other 

tables.

The present-value estimates represent the receipt effects, net of future tax payments that follow from activities undertaken 

during calendar year 2021 which cause the deferrals or other long-term receipt effects. For instance, a pension contribution in 

2021 would cause a deferral of tax payments on wages in 2021 and on pension fund earnings on this contribution (e.g., interest) 

in later years. In some future year, however, the 2021 pension contribution and accrued earnings will be paid out and taxes will 

be due; these receipts are included in the present-value estimate. In general, this conceptual approach is similar to the one used 

for reporting the budgetary effects of credit programs, where direct loans and guarantees in a given year affect future cash flows.

Tax Expenditure Baselines

A tax expenditure is an exception to baseline provisions of the tax structure that usually results in a reduction in the amount of tax 

owed. The 1974 Congressional Budget Act, which mandated the tax expenditure budget, did not specify the baseline provisions of the 

tax law. As noted previously, deciding whether provisions are exceptions, therefore, is a matter of judgment. As in prior years, most of 

this year’s tax expenditure estimates are presented using two baselines: the normal tax baseline and the reference tax law baseline. Tax 

expenditures may take the form of credits, deductions, special exceptions and allowances.

The normal tax baseline is patterned on a practical variant of a comprehensive income tax, which defines income as the sum 

of consumption and the change in net wealth in a given period of time. The normal tax baseline allows personal exemptions, a 

standard deduction, and deduction of expenses incurred in earning income. It is not limited to a particular structure of tax rates, 

or by a specific definition of the taxpaying unit.

The reference tax law baseline is also patterned on a comprehensive income tax, but it is closer to existing law. Reference tax 

law tax expenditures are limited to special exceptions from a generally provided tax rule that serves programmatic functions in 

a way that is analogous to spending programs. Provisions under the reference tax law baseline are generally tax expenditures 

under the normal tax baseline, but the reverse is not always true.

Both the normal tax and reference tax law baselines allow several major departures from a pure comprehensive income tax. 

For example, under the normal tax and reference tax law baselines:
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• Income is taxable only when it is realized in exchange. Thus, the deferral of tax on unrealized capital gains is not regarded as a tax expenditure. Accrued income would be taxed under a comprehensive income tax.

•There is a separate corporate income tax. 

•Tax rates on noncorporate business income vary by level of income. 

• Individual tax rates, including brackets, standard deduction, and personal exemptions, are allowed to vary with marital 

status.

•Values of assets and debt are not generally adjusted for inflation. A comprehensive income tax would adjust the cost 

basis of capital assets and debt for changes in the general price level. Thus, under a comprehensive income tax baseline, the failure to take account of inflation in measuring depreciation, capital gains, and interest income would be 

regarded as a negative tax expenditure (i.e., a tax penalty), and failure to take account of inflation in measuring interest costs would be regarded as a positive tax expenditure (i.e., a tax subsidy).

•The base erosion and anti-abuse tax (BEAT) for multinational corporations is treated as a minimum tax and considered 

part of the rate structure.

Although the reference tax law and normal tax baselines are generally similar, areas of difference include:

Tax rates. The separate schedules applying to the various taxpaying units and the Alternative Minimum Tax are treated as 

part of the baseline rate structure under both the reference tax law and normal tax methods.

Income subject to the tax. Income subject to tax is defined as gross income less the costs of earning that income. Under the reference tax law, gross income does not include gifts defined as receipts of money or property that are not consideration in an 

exchange nor does gross income include most transfer payments from the Government.2 The normal tax baseline also excludes 

gifts between individuals from gross income. Under the normal tax baseline, however, all cash transfer payments from the Government to private individuals are counted in gross income, and exemptions of such transfers from tax are identified as tax expenditures. The costs of earning income are generally deductible in determining taxable income under both the reference tax 

law and normal tax baselines.3

Capital recovery. Under the reference tax law baseline no tax expenditures arise from accelerated depreciation. Under the 

normal tax baseline, the depreciation allowance for property is computed using estimates of economic depreciation.

Descriptions of Income Tax Provisions

Descriptions of the individual and corporate income tax expenditures reported on in this document follow. These descriptions 

relate to current law as of July 31,2021. Legislation enacted in 2021 expanded the scope and size of tax expenditures by providing pandemic related relief.. The American Rescue Plan (ARP), enacted in March 2021, provided additional COVID related 

rebates for eligible individuals and exempted some unemployment benefits from income taxation in 2021. It also expanded the 

child tax credit for 2021 and permanently extended the scope of the earned income tax credit, among other smaller changes. 

National Defense

1. Exclusion of benefits and allowances to armed forces personnel.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to 

wealth that do not materially differ from cash wages. As an example, a rental voucher of $100 is (approximately) equal in value 

to $100 of cash income. In contrast to this treatment, certain housing and meals, in addition to other benefits provided military 

2 Gross income does, however, include transfer payments associated with past employment, such as Social Security benefits.

3 In the case of individuals who hold “passive’’ equity interests in businesses, the pro-rata shares of sales and expense deductions reportable in a year are limited. A passive business activity is defined generally to be one in which the holder of the interest, usually a partnership interest, does not actively perform managerial or other participatory functions. The taxpayer may generally report no larger deductions for a year than will reduce taxable income from such activities to 

zero. Deductions in excess of the limitation may be taken in subsequent years, or when the interest is liquidated. In addition, costs of earning income may be 

limited under the Alternative Minimum Tax.
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personnel, either in cash or in kind, as well as certain amounts of pay related to combat service, are excluded from income subject to tax. 

International Affairs

2. Exclusion of income earned abroad by U.S. citizens.—Under the baseline tax system, all compensation received by U.S. 

citizens and residents is properly included in their taxable income. It makes no difference whether the compensation is a result 

of working abroad or whether it is labeled as a housing allowance. In contrast to this treatment, U.S. tax law allows U.S. citizens and residents who live abroad, work in the private sector, and satisfy a foreign residency requirement to exclude up to 

$80,000, plus adjustments for inflation since 2004, in foreign earned income from U.S. taxes. In addition, if these taxpayers are 

provided housing by their employers, then they may also exclude the cost of such housing from their income to the extent that it 

exceeds 16 percent of the earned income exclusion limit. This housing exclusion is capped at 30 percent of the earned income 

exclusion limit, with geographical adjustments. If taxpayers do not receive a specific allowance for housing expenses, they may 

deduct housing expenses up to the amount by which foreign earned income exceeds their foreign earned income exclusion.

3. Exclusion of certain allowances for Federal employees abroad.—In general, all compensation received by U.S. citizens 

and residents is properly included in their taxable income. It makes no difference whether the compensation is a result of working abroad or whether it is labeled as an allowance for the high cost of living abroad. In contrast to this treatment, U.S. Federal 

civilian employees and Peace Corps members who work outside the continental United States are allowed to exclude from U.S. 

taxable income certain special allowances they receive to compensate them for the relatively high costs associated with living 

overseas. The allowances supplement wage income and cover expenses such as rent, education, and the cost of travel to and 

from the United States.

4. Reduced tax rate on active income of controlled foreign corporations (normal tax method).—Under the baseline tax system, worldwide income forms the tax base of U.S. corporations. In contrast, U.S. tax law exempts or preferentially taxes certain 

portions of this income. Prior to the passage of the Tax Cuts and Jobs Act TCJA (effective January 1, 2018), active foreign income was generally taxed only upon repatriation. TCJA changed these rules, so that certain active income (called “global intangible low tax income” or “GILTI”) is taxed currently, even if it is not distributed. However, U.S. corporations generally receive a 50 percent deduction from U.S. tax on their GILTI (the deduction decreases to 37.5 percent in 2026), resulting in a substantially reduced rate of tax. In addition, some active income is excluded from tax, and distributions out of active income are 

no longer taxed upon repatriation. These reductions and exemptions from U.S. taxation are considered tax expenditures. However, U.S. shareholders of specified foreign corporations must include their pro rata share of accumulated post-1986 deferred 

foreign income (as of the last taxable year before January 1, 2018) in U.S. taxable income, and this inclusion acts as an offset to 

the reduced tax rate on CFC income in the years in which the payments are received.

5. Deduction for foreign-derived intangible income derived from a trade or business within the United States.—Under the 

baseline tax system, the United States taxes income earned by U.S. corporations from serving foreign markets (e.g., exports and royalties) at the full U.S. rate. After the passage of TCJA, domestic corporations are allowed a deduction equal to 37.5 percent of “foreign-derived intangible income,” which is essentially income from serving foreign markets (defined on a formulaic basis). The deduction falls to 21.875 percent in 2026.

6. Interest Charge Domestic International Sales Corporations (IC-DISCs).—Under the baseline tax system, taxpayer earnings are subject to tax using the regular tax rates applied to all taxpayers. In contrast, IC-DISCs allow a portion of income from 

exports to be taxed at the qualified dividend rate which is no higher than 20 percent (plus a 3.8 percent surtax for high-income 

taxpayers).

General Science, Space, and Technology

7. Expensing of research and experimentation expenditures (normal tax method).—The baseline tax system allows a deduction for the cost of producing income. It requires taxpayers to capitalize the costs associated with investments over time to better match the streams of income and associated costs. Research and experimentation (R&E) projects can be viewed as investments because, if successful, their benefits accrue for several years. It is often difficult, however, to identify whether a specific 

R&E project is successful and, if successful, what its expected life will be. Because of this ambiguity, the reference tax law baseline system would allow expensing of R&E expenditures. In contrast, under the normal tax method, the expensing of R&E expenditures is viewed as a tax expenditure. The baseline assumed for the normal tax method is that all R&E expenditures are 

successful and have an expected life of five years. Current law requires R&E expenditures paid or incurred in taxable years beginning after December 31, 2021, to be capitalized and amortized over 5 years, while allowing R&E expenditures paid or incurred in prior taxable years to be expensed.

8. Credit for increasing research activities.—The baseline tax system would uniformly tax all returns to investments and not 

allow credits for particular activities, investments, or industries. In contrast, the Tax Code allows an R&E credit of up to 20 
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percent of qualified research expenditures in excess of a base amount. The base amount of the credit is generally determined by 

multiplying a “fixed-base percentage” by the average amount of the company’s gross receipts for the prior four years. The taxpayer’s fixed base percentage generally is the ratio of its research expenses to gross receipts for 1984 through 1988. Taxpayers 

can elect the alternative simplified credit regime, which equals 14 percent of qualified research expenses that exceed 50 percent 

of the average qualified research expenses for the three preceding taxable years. 

Energy

9. Expensing of exploration and development costs, fuels.—Under the baseline tax system, the costs of exploring and developing oil and gas wells and coal mines or other natural fuel deposits would be capitalized and then amortized (or depreciated) 

over an estimate of the economic life of the property. This insures that the net income from the well or mine is measured appropriately each year. In contrast to this treatment, current law allows immediate deduction, i.e., expensing, of intangible drilling 

costs for successful investments in domestic oil and gas wells (such as wages, the cost of using machinery for grading and drilling, and the cost of unsalvageable materials used in constructing wells). Current law also allows immediate deduction of eligible 

exploration and development costs for domestic coal mines and other natural fuel deposits. Because expensing allows recovery 

of costs sooner, it is more advantageous to the taxpayer than amortization. Expensing provisions for exploration expenditures 

apply only to properties for which a deduction for percentage depletion is allowable. For oil and gas wells, integrated oil companies may expense only 70 percent of intangible drilling costs and must amortize the remaining 30 percent over five years. 

Non-integrated oil companies may expense all such costs.

10. Excess of percentage over cost depletion, fuels.—The baseline tax system would allow recovery of the costs of developing certain oil, gas, and mineral fuel properties using cost depletion. Cost depletion is similar in concept to depreciation, in that 

the costs of developing or acquiring the asset are capitalized and then gradually reduced over an estimate of the asset’s economic life, as is appropriate for measuring net income. In contrast, the Tax Code generally allows independent fuel producers and 

royalty owners to take percentage depletion deductions rather than cost depletion on limited quantities of output. Under percentage depletion, taxpayers deduct a percentage of gross income from fossil fuel production. In certain cases the deduction is 

limited to a fraction of the asset’s net income. Over the life of an investment, percentage depletion deductions can exceed the 

cost of the investment. Consequently, percentage depletion may provide more advantageous tax treatment than would cost depletion, which limits deductions to an investment’s cost.

11. Exception from passive loss limitation for working interests in oil and gas properties.—The baseline tax system accepts 

current law’s general rule limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., 

wages, interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate, though there are numerous additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. Losses are limited in an attempt to limit tax sheltering activities. Passive losses that are unused may be 

carried forward and applied against future passive income. An exception from the passive loss limitation is provided for a working interest in an oil or gas property that the taxpayer holds directly or through an entity that does not limit the liability of the 

taxpayer with respect to the interest. Thus, taxpayers can deduct losses from such working interests against nonpassive income 

without regard to whether they materially participate in the activity.

12. Capital gains treatment of royalties on coal.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. Current law

allows capital gains realized by individuals to be taxed at a preferentially low rate that is no higher than 20 percent (plus the 3.8

percent surtax). Certain sales of coal under royalty contracts qualify for taxation as capital gains rather than ordinary income.

13. Exclusion of interest on energy facility bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In 

contrast, the Tax Code allows interest earned on State and local bonds used to finance construction of certain energy facilities 

to be exempt from tax. These bonds are generally subject to the State private-activity-bond annual volume cap.

14. Enhanced oil recovery credit.—A credit is provided equal to 15 percent of the taxpayer’s costs for enhanced oil recovery on U.S. projects. The credit is reduced in proportion to the ratio of the reference price of oil for the previous calendar year 

minus $28 (adjusted for inflation from 1990) to $6.

15. Energy production credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code 

provides a credit for certain electricity produced from wind energy, biomass, geothermal energy, solar energy, small irrigation 

power, municipal solid waste, or qualified hydropower and sold to an unrelated party. Wind facilities must have begun construction before January 1, 2022. Facilities that begin construction in 2017 receive 80 percent of the credit, facilities that begin 

construction in 2018 receive 60 percent of the credit, facilities that begin construction in 2019 receive 40 percent of the credit, 

and facilities that begin construction in 2020-2021 receive 60 percent of the credit. Qualified facilities producing electricity from 

sources other than wind must begin construction before January 1, 2022. In addition to the electricity production credit, a tenyear income tax credit is allowed for the production of refined coal for facilities placed in service before January 1, 2012. The 
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Tax Code also provided an income tax credit for Indian coal facilities. The Indian coal facilities credit expires on December 31, 

2021.

16. Marginal wells credit.—A credit is provided for crude oil and natural gas produced from a qualified marginal well. A 

marginal well is one that does not produce more than 1,095 barrel-of-oil equivalents per year, with this limit adjusted proportionately for the number of days the well is in production. The credit is no more than $3.00 per barrel of qualified crude oil production and $0.50 per thousand cubic feet of qualified natural gas production. The credit for natural gas is reduced in proportion to the amount by which the reference price of natural gas at the wellhead for the previous calendar year exceeds $1.67 per 

thousand cubic feet and is zero for a reference price that exceeds $2.00. The credit for crude oil is reduced in proportion to the 

amount by which the reference price of oil for the previous calendar year exceeds $15.00 per barrel and is zero for a reference 

price that exceeds $18.00. All dollar amounts are adjusted for inflation from 2004.

17. Energy investment credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. However, the Tax Code 

provides credits for investments in solar and geothermal energy property, qualified fuel cell power plants, stationary microturbine power plants, geothermal heat pumps, waste energy recovery property, small wind property, offshore wind, and combined heat and power property. The credit is 30 percent for property that begins construction before 2020, 26 percent for property that begins construction in 2020-2022, and 22 percent for property that begins construction in 2023 and in all cases that is 

placed in service before January 1, 2026. The credit for offshore wind is 30 percent for facilities placed in service before January 

1, 2026. A 10 percent credit is available for geothermal or qualified solar property placed in service after December 31, 2025.

Owners of renewable power facilities that qualify for the energy production credit may instead elect to take an energy investment credit at a rate specified by law.

18. Alcohol fuel credits.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides an income tax credit for qualified cellulosic biofuel production which was renamed the Second generation biofuel producer credit. This provision expires on December 31, 2021. 

19. Bio-diesel and small agri-biodiesel producer tax credits.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. However, the Tax Code allows an income tax credit for Bio-diesel and for Bio-diesel derived from virgin sources. In lieu of 

the Bio-diesel credit, the taxpayer could claim a refundable excise tax credit. In addition, small agri-biodiesel producers were 

eligible for a separate income tax credit for biodiesel production, and a separate credit was available for qualified renewable 

diesel fuel mixtures. This provision expires on December 31, 2022. 

20. Tax credits for clean-fuel burning vehicles and refueling property.—The baseline tax system would not allow credits 

for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investmentlike activities. In contrast, the Tax Code allows credits for plug-in electric-drive motor vehicles, alternative fuel vehicle refueling 

property, two-wheeled plug-in electric vehicles, and fuel cell motor vehicles. These provisions, except for the plug-in electricdrive motor vehicle credit, expired after December 31, 2017.

21. Exclusion of utility conservation subsidies.—The baseline tax system generally takes a comprehensive view of taxable 

income that includes a wide variety of (measurable) accretions to wealth. In certain circumstances, public utilities offer rate subsidies to non-business customers who invest in energy conservation measures. These rate subsidies are equivalent to payments 

from the utility to its customer, and so represent accretions to wealth, income that would be taxable to the customer under the 

baseline tax system. In contrast, the Tax Code exempts these subsidies from the non-business customer’s gross income.

22. Credit for holding clean renewable energy bonds.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides for the issuance of Clean Renewable Energy Bonds that entitle the bond holder to a Federal income tax credit in lieu of interest. As of 

March 2010, issuers of the unused authorization of such bonds could opt to receive direct payment with the yield becoming 

fully taxable.

23. Credit for investment in clean coal facilities.—The baseline tax system would uniformly tax all returns to investments 

and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides investment tax credits for clean coal facilities producing electricity and for industrial gasification combined cycle projects. 

24. Amortize all geological and geophysical expenditures over two years.—The baseline tax system allows taxpayers to deduct the decline in the economic value of an investment over its economic life. However, the Tax Code allows geological and 

geophysical expenditures incurred in connection with oil and gas exploration in the United States to be amortized over two 

years for non-integrated oil companies, a span of time that is generally shorter than the economic life of the assets.

25. Allowance of deduction for certain energy efficient commercial building property.—The baseline tax system would not 

allow deductions in lieu of normal depreciation allowances for particular investments in particular industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code allows a deduction for 

certain energy efficient commercial building property. The basis of such property is reduced by the amount of the deduction. 
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Starting in 2021, the maximum deduction amount per square foot will be increased by a cost-of -living adjustment.

26. Credit for construction of new energy efficient homes.—The baseline tax system would not allow credits for particular 

activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. 

However, the Tax Code allowed contractors a tax credit of $2,000 for the construction of a qualified new energy-efficient home 

that had an annual level of heating and cooling energy consumption at least 50 percent below the annual consumption under 

the 2006 International Energy Conservation Code. The credit equaled $1,000 in the case of a new manufactured home that met 

a 30 percent standard or requirements for EPA’s Energy Star homes. This provision expired on December 31, 2017.

27. Credit for energy efficiency improvements to existing homes.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, the Tax Code provided an investment tax credit for expenditures made on 

insulation, exterior windows, and doors that improved the energy efficiency of homes and met certain standards. The Tax Code 

also provided a credit for purchases of advanced main air circulating fans, natural gas, propane, or oil furnaces or hot water 

boilers, and other qualified energy efficient property. This provision expired on December 31, 2017. But legislation enacted in 

2020 allowed taxpayers to claim tax credits retroactively for three years.

28. Credit for residential energy efficient property.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. However, the Tax Code provides a credit for the 

purchase of a qualified photovoltaic property and solar water heating property, as well as for fuel cell power plants, geothermal 

heat pumps, and small wind property used in or placed on a residence. The credit is 30 percent for property placed in service 

before January 1, 2020, 26 percent for property placed in service in 2020- 2022, and 22 percent for property placed in service in 

2023. 

29. Credit for qualified energy conservation bonds.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. However, the Tax Code provides for the issuance of energy conservation bonds which entitle the bond holder to a Federal income tax credit in lieu of interest. As of March 

2010, issuers of the unused authorization of such bonds could opt to receive direct payment with the yield becoming fully taxable.

30. Advanced energy property credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, the Tax Code provides a 30 percent investment credit for property used in a qualified advanced

energy manufacturing project. The Treasury Department may award up to $2.3 billion in tax credits for qualified investments. 

31. Advanced nuclear power facilities production credit.—The baseline tax system would not allow credits or deductions 

for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investmentlike activities. In contrast, the Tax Code allows a tax credit equal to 1.8 cents times the number of kilowatt hours of electricity 

produced at a qualifying advanced nuclear power facility. A taxpayer may claim no more than $125 million per 1,000 megawatts of capacity. The Treasury Department may allocate up to 6,000 megawatts of credit-eligible capacity. Any unutilized national capacity limitation shall be allocated after December 31, 2020, according to prioritization rules set forth by statute.

32. Reduced tax rate for nuclear decommissioning funds.—The baseline tax system would uniformly tax all returns to investments and not allow special rates for particular activities, investments, or industries. In contrast, the Tax Code provides a 

special 20 percent tax rate for investments made by Nuclear Decommissioning Reserve Funds.

Natural Resources and Environment

33. Expensing of exploration and development costs, nonfuel minerals.—The baseline tax system allows the taxpayer to 

deduct the depreciation of an asset according to the decline in its economic value over time. However, certain capital outlays 

associated with exploration and development of nonfuel minerals may be expensed rather than depreciated over the life of the 

asset.

34. Excess of percentage over cost depletion, nonfuel minerals.—The baseline tax system allows the taxpayer to deduct the 

decline in the economic value of an investment over time. Under current law, however, most nonfuel mineral extractors may 

use percentage depletion (whereby the deduction is fixed as a percentage of receipts) rather than cost depletion, with percentage 

depletion rates ranging from 22 percent for sulfur to 5 percent for sand and gravel. Over the life of an investment, percentage 

depletion deductions can exceed the cost of the investment. Consequently, percentage depletion may provide more advantageous tax treatment than would cost depletion, which limits deductions to an investment’s cost.

35. Exclusion of interest on bonds for water, sewage, and hazardous waste facilities.—The baseline tax system generally 

would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to 

certain types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance 

construction of sewage, water, or hazardous waste facilities to be exempt from tax. These bonds are generally subject to the 

State private-activity bond annual volume cap.

36. Capital gains treatment of certain timber.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. However, under 

current law certain timber sales can be treated as a capital gain rather than ordinary income and therefore subject to the lower 
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capital-gains tax rate. Current law allows capital gains to be taxed at a preferentially low rate that is no higher than 20 percent 

(plus the 3.8 percent surtax). 

37. Expensing of multi-period timber growing costs.—The baseline tax system requires the taxpayer to capitalize costs associated with investment property. However, most of the production costs of growing timber may be expensed under current 

law rather than capitalized and deducted when the timber is sold, thereby accelerating cost recovery.

38. Tax incentives for preservation of historic structures.—The baseline tax system would not allow credits for particular 

activities, investments, or industries. However, expenditures to preserve and restore certified historic structures qualify for an 

investment tax credit of 20 percent for certified rehabilitation activities. The taxpayer’s recoverable basis must be reduced by the 

amount of the credit. The credit must be claimed ratably over the five years after the property is placed in service, for property 

placed in service after December 31, 2017.

39. Carbon oxide sequestration credit.—The baseline tax system would uniformly tax all returns to investments and not 

allow credits for particular activities, investments, or industries. In contrast, the Tax Code allows a credit for qualified carbon 

oxide captured at a qualified facility and disposed of in secure geological storage. In addition, the provision allows a credit for 

qualified carbon oxide that is captured at a qualified facility and used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project. The credit differs according to whether the carbon was captured using equipment which was originally 

placed in service before February 9, 2018, or thereafter.

40. Deduction for endangered species recovery expenditures.—The baseline tax system would not allow deductions in addition to normal depreciation allowances for particular investments in particular industries. Instead, it generally would seek to 

tax uniformly all returns from investment-like activities. In contrast, under current law farmers can deduct up to 25 percent of 

their gross income for expenses incurred as a result of site and habitat improvement activities that will benefit endangered species on their farm land, in accordance with site specific management actions included in species recovery plans approved pursuant to the Endangered Species Act of 1973.

Agriculture

41. Expensing of certain capital outlays.—The baseline tax system requires the taxpayer to capitalize costs associated with 

investment property. However, farmers may expense certain expenditures for feed and fertilizer, for soil and water conservation 

measures, and certain other capital improvements under current law.

42. Expensing of certain multiperiod production costs.—The baseline tax system requires the taxpayer to capitalize costs 

associated with an investment over time. However, the production of livestock and crops with a production period greater than 

two years is exempt from the uniform cost capitalization rules (e.g., for costs for establishing orchards or structure improvements), thereby accelerating cost recovery.

43. Treatment of loans forgiven for solvent farmers.—Because loan forgiveness increases a debtors net worth the baseline 

tax system requires debtors to include the amount of loan forgiveness as income or else reduce their recoverable basis in the 

property related to the loan. If the amount of forgiveness exceeds the basis, the excess forgiveness is taxable if the taxpayer is 

not insolvent. For bankrupt debtors, the amount of loan forgiveness reduces carryover losses, unused credits, and then basis, 

with the remainder of the forgiven debt excluded from taxation. Qualified farm debt that is forgiven, however, is excluded from 

income even when the taxpayer is solvent.

44. Capital gains treatment of certain agriculture income.—The baseline tax system generally would tax all income under 

the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. In 

contrast, current law allows capital gains to be taxed at a preferentially low rate that is no higher than 20 percent (plus the 3.8

percent surtax). Certain agricultural income, such as unharvested crops, qualify for taxation as capital gains rather than ordinary income, and so benefit from the preferentially low 20 percent maximum tax rate on capital gains (plus the 3.8 percent surtax). 

45. Income averaging for farmers.—The baseline tax system generally taxes all earned income each year at the rate determined by the income tax. However, taxpayers may average their taxable income from farming and fishing over the previous 

three years.

46. Deferral of gain on sales of farm refiners.—The baseline tax system generally subjects capital gains to taxes the year 

that they are realized. However, the Tax Code allows a taxpayer who sells stock in a farm refiner to a farmers’ cooperative to 

defer recognition of the gain if the proceeds are re-invested in a qualified replacement property.

47. Expensing of reforestation expenditures.—The baseline tax system requires the taxpayer to capitalize costs associated 

with an investment over time. In contrast, the Tax Code provides for the expensing of the first $10,000 in reforestation expenditures with 7-year amortization of the remaining expenses.

Commerce and Housing

This category includes a number of tax expenditure provisions that also affect economic activity in other functional catego-
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ries. For example, provisions related to investment, such as accelerated depreciation, could be classified under the energy, natural resources and environment, agriculture, or transportation categories.

48. Exemption of credit union income.—Under the baseline tax system, corporations pay taxes on their profits under the 

regular tax rate schedule. However, in the Tax Code the earnings of credit unions not distributed to members as interest or dividends are exempt from the income tax.

49. Exclusion of life insurance death benefits.—Under the baseline tax system, individuals and corporations would pay 

taxes on their income when it is (actually or constructively) received or accrued. Nevertheless, current law generally excludes 

from tax amounts received under life insurance contracts if such amounts are paid by reason of the death of the insured.

50. Exclusion or special alternative tax for small property and casualty insurance companies.—The baseline tax system 

would require corporations to pay taxes on their profits under the regular tax rate schedule. It would not allow preferentially 

low (or zero) tax rates to apply to certain types or sources of income. Under current law, however, stock non-life insurance 

companies are generally exempt from tax if their gross receipts for the taxable year do not exceed $600,000 and more than 50 

percent of such gross receipts consist of premiums. Mutual non-life insurance companies are generally tax-exempt if their annual gross receipts do not exceed $150,000 and more than 35 percent of gross receipts consist of premiums. Also, non-life insurance companies with no more than a specified level of annual net written premiums generally may elect to pay tax only on their 

taxable investment income provided certain ownership diversification requirements are met. The underwriting income (premiums, less insurance losses and expenses) of electing companies is excluded from tax. The specified premium limit is indexed for 

inflation; for 2021, the premium limit is $2.4 million.

51. Tax exemption of insurance income earned by tax-exempt organizations.—Under the baseline tax system, corporations 

pay taxes on their profits under the regular tax rate schedule. The baseline tax system would not allow preferentially low (or 

zero) tax rates to apply to certain types or sources of income. Generally the income generated by life and property and casualty 

insurance companies is subject to tax, albeit under special rules. However, income from insurance operations conducted by certain tax-exempt organizations, such as fraternal societies, voluntary employee benefit associations, and others are exempt from 

tax.

52. Exclusion of interest spread of financial institutions.—The baseline tax system generally would tax all income under 

the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Consumers pay for some deposit-linked services, such as check cashing, by accepting a below-market interest rate on 

their demand deposits. If they received a market rate of interest on those deposits and paid explicit fees for the associated services, they would pay taxes on the full market rate and (unlike businesses) could not deduct the fees. The Government thus 

foregoes tax on the difference between the risk-free market interest rate and below-market interest rates on demand deposits, 

which under competitive conditions should equal the value of deposit services.

53. Exclusion of interest on owner-occupied mortgage subsidy bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or 

sources of income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance homes purchased 

by first-time, low-to-moderate-income buyers to be exempt from tax. These bonds are generally subject to the State privateactivity-bond annual volume cap.

54. Exclusion of interest on rental housing bonds.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. 

In contrast, the Tax Code allows interest earned on State and local government bonds used to finance multifamily rental housing projects to be tax-exempt.

55. Mortgage interest expense on owner-occupied residences.—Under the baseline tax system, expenses incurred in earning income would be deductible. However, such expenses would not be deductible when the income or the return on an investment is not taxed. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for the value of owneroccupied housing services and also allows the owner-occupant to deduct mortgage interest paid on his or her primary residence 

and one secondary residence as an itemized non-business deduction. In general, the mortgage interest deduction is limited to 

interest on debt no greater than the owner’s basis in the residence, and is also limited to interest on debt of no more than $1 million. Interest on up to $100,000 of other debt secured by a lien on a principal or second residence is also deductible, irrespective 

of the purpose of borrowing, provided the total debt does not exceed the fair market value of the residence. As an alternative to 

the deduction, holders of qualified Mortgage Credit Certificates issued by State or local governmental units or agencies may 

claim a tax credit equal to a proportion of their interest expense. In the case of taxable years beginning after December 31, 2017, 

and before January 1, 2026, (1) the $1 million limit is reduced to $750,000 for indebtedness incurred after December 15, 2017, 

and (2) the deduction for interest on home equity indebtedness is disallowed.

56. Deductibility of State and local property tax on owner-occupied homes.—Under the baseline tax system, expenses incurred in earning income would be deductible. However, such expenses would not be deductible when the income or the return 

on an investment is not taxed. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for the value of 
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owner-occupied housing services and also allows the owner-occupant to deduct property taxes paid on real property. In the case 

of taxable years beginning after December 31, 2017, and before January 1, 2026, (1) the deduction for foreign real property taxes paid is disallowed and (2) the deduction for taxes paid in any taxable year, which includes the deduction for property taxes 

on real property, is limited to $10,000 ($5,000 in the case of a married individual filing a separate return).

57. Deferral of income from installment sales.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low (or zero) tax rates, or deferral of tax, to apply to certain types or sources 

of income. Dealers in real and personal property (i.e., sellers who regularly hold property for sale or resale) cannot defer taxable 

income from installment sales until the receipt of the loan repayment. Nondealers (i.e., sellers of real property used in their 

business) are required to pay interest on deferred taxes attributable to their total installment obligations in excess of $5 million. 

Only properties with sales prices exceeding $150,000 are includable in the total. The payment of a market rate of interest eliminates the benefit of the tax deferral. The tax exemption for nondealers with total installment obligations of less than $5 million 

is, therefore, a tax expenditure.

58. Capital gains exclusion on home sales.—The baseline tax system would not allow deductions and exemptions for certain types of income. In contrast, the Tax Code allows homeowners to exclude from gross income up to $250,000 ($500,000 in 

the case of a married couple filing a joint return) of the capital gains from the sale of a principal residence. To qualify, the taxpayer must have owned and used the property as the taxpayer’s principal residence for a total of at least two of the five years 

preceding the date of sale. In addition, the exclusion may not be used more than once every two years.

59. Exclusion of net imputed rental income.—Under the baseline tax system, the taxable income of a taxpayer who is an 

owner-occupant would include the implicit value of gross rental income on housing services earned on the investment in owneroccupied housing and would allow a deduction for expenses, such as interest, depreciation, property taxes, and other costs, associated with earning such rental income. In contrast, the Tax Code allows an exclusion from taxable income for the implicit 

gross rental income on housing services, while in certain circumstances allows a deduction for some costs associated with such 

income, such as for mortgage interest and property taxes.

60. Exception from passive loss rules for $25,000 of rental loss.—The baseline tax system accepts current law’s general 

rule limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., wages, interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate, and there are 

numerous additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. 

Losses are limited in an attempt to limit tax sheltering activities. Passive losses that are unused may be carried forward and applied against future passive income. In contrast to the general restrictions on passive losses, the Tax Code exempts certain owners of rental real estate activities from “passive income” limitations. The exemption is limited to $25,000 in losses and phases 

out for taxpayers with income between $100,000 and $150,000. 

61. Credit for low-income housing investments.—The baseline tax system would uniformly tax all returns to investments 

and not allow credits for particular activities, investments, or industries. However, under current law taxpayers who invest in 

certain low-income housing are eligible for a tax credit. The credit rate is set so that the present value of the credit is equal to at 

least 70 percent of the building’s qualified basis for new construction and 30 percent for (1) housing receiving other Federal 

benefits (such as tax-exempt bond financing) or (2) substantially rehabilitated existing housing. The credit can exceed these levels in certain statutorily defined and State designated areas where project development costs are higher. The credit is allowed in 

equal amounts over 10 years and is generally subject to a volume cap. 

62. Accelerated depreciation on rental housing (normal tax method).—Under a comprehensive economic income tax, the 

costs of acquiring a building are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and tear or obsolescence. This insures that the net income from the rental property is measured appropriately each year. Current law allows depreciation that is accelerated relative to economic depreciation. However, the depreciation provisions of the Tax Code are part of the reference tax law, and thus do not give rise to tax expenditures under reference 

tax law. Under normal tax baseline, in contrast, depreciation allowances reflect estimates of economic depreciation.

63. Discharge of mortgage indebtedness.—Under the baseline tax system, all income would generally be taxed under the 

regular tax rate schedule. The baseline tax system would not allow preferentially low (or zero) tax rates to apply to certain types 

or sources of income. In contrast, the Tax Code allowed an exclusion from a taxpayer’s taxable income for any discharge of 

indebtedness of up to $2 million ($1 million in the case of a married individual filing a separate return) from a qualified principal residence. The provision applied to debt discharged after January 1, 2021, and before January 1, 2026.

64. Premiums for mortgage insurance deductible as interest.—Under the baseline tax system, expenses incurred in earning 

income would be deductible. However, such expenses would not be deductible when the income or the return on an investment 

is not taxed. In contrast, the Tax Code allows mortgage insurance premiums to be treated as deductible mortgage interest expenses. The provision applies to premiums paid in 2021.

65. Discharge of business indebtedness.—Under the baseline tax system, all income would generally be taxed under the 

regular tax rate schedule. The baseline tax system would not allow preferentially low (or zero) tax rates to apply to certain types 

or sources of income. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for any discharge of qual-
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ified real property business indebtedness by taxpayers other than a C corporation. If the canceled debt is not reported as current 

income, however, the basis of the underlying property must be reduced by the amount canceled.

66. Exceptions from imputed interest rules.—Under the baseline tax system, holders (issuers) of debt instruments are generally required to report interest earned (paid) in the period it accrues, not when received. In addition, the amount of interest 

accrued is determined by the actual price paid, not by the stated principal and interest stipulated in the instrument. But under 

current law, any debt associated with the sale of property worth less than $250,000 is exempted from the general interest accounting rules. This general $250,000 exception is not a tax expenditure under reference tax law but is under normal tax baseline. Current law also includes exceptions for certain property worth more than $250,000. These are tax expenditure under reference tax law and normal tax baselines. These exceptions include, sales of personal residences worth more than $250,000, and 

sales of farms and small businesses worth between $250,000 and $1 million.

67. Treatment of qualified dividends.—The baseline tax system generally would tax all income under the regular tax rate 

schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. For individuals, tax rates 

on regular income vary from 10 percent to 39.6 percent in the budget window (plus a 3.8 percent surtax on high income taxpayers), depending on the taxpayer’s income. In contrast, under current law, qualified dividends are taxed at a preferentially low 

rate that is no higher than 20 percent (plus the 3.8 percent surtax). 

68. Capital gains (except agriculture, timber, iron ore, and coal).—The baseline tax system generally would tax all income 

under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. Under current law, capital gains on assets held for more than one year are taxed at a preferentially low rate that is no 

higher than 20 percent (plus the 3.8 percent surtax). 

69. Capital gains exclusion of small corporation stock.—The baseline tax system would not allow deductions and exemptions or provide preferential treatment of certain sources of income or types of activities. In contrast, the Tax Code provided an 

exclusion of 50 percent, applied to ordinary rates with a maximum of a 28 percent tax rate, for capital gains from qualified 

small business stock held by individuals for more than 5 years; 75 percent for stock issued after February 17, 2009 and before 

September 28, 2010; and 100 percent for stock issued after September 27, 2010. A qualified small business is a corporation 

whose gross assets do not exceed $50 million as of the date of issuance of the stock. 

70. Step-up basis of capital gains at death.—Under the baseline tax system, unrealized capital gains would be taxed when 

assets are transferred at death. It would not allow for exempting gains upon transfer of the underlying assets to the heirs. In contrast, capital gains on assets held at the owner’s death are not subject to capital gains tax under current law. The cost basis of the 

appreciated assets is adjusted to the market value at the owner’s date of death which becomes the basis for the heirs.

71. Carryover basis of capital gains on gifts.—Under the baseline tax system, unrealized capital gains would be taxed 

when assets are transferred by gift. In contrast, when a gift of appreciated asset is made under current law, the donor’s basis in 

the transferred property (the cost that was incurred when the transferred property was first acquired) carries over to the donee. 

The carryover of the donor’s basis allows a continued deferral of unrealized capital gains.

72. Ordinary income treatment of loss from small business corporation stock sale.—The baseline tax system limits to 

$3,000 the write-off of losses from capital assets, with carryover of the excess to future years. In contrast, the Tax Code allows 

up to $100,000 in losses from the sale of small business corporate stock (capitalization less than $1 million) to be treated as ordinary losses and fully deducted.

73. Deferral of capital gains from like-kind exchanges.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates, or deferral of tax, to apply to certain types or 

sources of income. In contrast, current law allows the deferral of accrued gains on assets transferred in qualified like-kind exchanges.

74. Depreciation of buildings other than rental housing (normal tax method).—Under a comprehensive economic income 

tax, the costs of acquiring a building are capitalized and depreciated over time in accordance with the decline in the property’s 

economic value due to wear and tear or obsolescence. This insures that the net income from the property is measured appropriately each year. Current law allows depreciation deductions that differ from those under economic depreciation. However, the 

depreciation provisions of the Tax Code are part of the reference tax law, and thus do not give rise to tax expenditures under 

reference tax law. Under normal tax baseline, in contrast, depreciation allowances reflect estimates of economic depreciation.

75. Accelerated depreciation of machinery and equipment (normal tax method).—Under a comprehensive economic income tax, the costs of acquiring machinery and equipment are capitalized and depreciated over time in accordance with the 

decline in the property’s economic value due to wear and tear or obsolescence. This insures that the net income from the property is measured appropriately each year. Current law allows depreciation deductions that are accelerated relative to economic 

depreciation. In particular, through 2022, 100 percent of the purchase cost of qualified property is eligible to be expensed immediately; this percentage phases out to zero through 2027. The depreciation provisions of the Tax Code are part of the reference tax law, and thus do not give rise to tax expenditures under reference tax law. Under the normal tax baseline, in contrast,

depreciation allowances reflect estimates of economic depreciation.

76. Expensing of certain small investments (normal tax method).—Under the reference tax law baseline, the costs of ac-
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quiring tangible property and computer software would be depreciated using the Tax Code’s depreciation provisions. Under the 

normal tax baseline, depreciation allowances are estimates of economic depreciation. However, subject to investment limitations, the Tax Code allows up to $1 million (indexed for inflation) in qualifying investments in tangible property and certain 

computer software to be expensed rather than depreciated over time.

77. Exclusion of interest on small issue bonds.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on small issue industrial development bonds (IDBs) issued by State and local governments to finance manufacturing facilities to be tax exempt. Depreciable property financed with small issue IDBs must be 

depreciated, however, using the straight-line method. The annual volume of small issue IDBs is subject to the unified volume 

cap discussed in the mortgage housing bond section above.

78. Special rules for certain film and TV production.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow deductions and exemptions or preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allowed taxpayers to deduct up to $15 million per production ($20 

million in certain distressed areas) in non-capital expenditures incurred during the year. This provision is scheduled to expire at 

the end of 2025.

79. Allow 20-percent deduction to certain pass-through income.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow deductions and exemptions or preferentially low (or zero) tax rates to apply 

to certain types or sources of income. In contrast, for tax years 2018 to 2025, the Tax Code allows for a deduction equal to up to 

20 percent of income attributable to domestic pass-through businesses, subject to certain limitations.

Transportation

80. Tonnage tax.—The baseline tax system generally would tax all profits and income under the regular tax rate schedule. 

U.S. shipping companies may choose to be subject to a tonnage tax based on gross shipping weight in lieu of an income tax, in 

which case profits would not be subject to tax under the regular tax rate schedule.

81. Deferral of tax on shipping companies.—The baseline tax system generally would tax all profits and income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. 

In contrast, the Tax Code allows certain companies that operate U.S. flag vessels to defer income taxes on that portion of their 

income used for shipping purposes (e.g., primarily construction, modernization and major repairs to ships, and repayment of 

loans to finance these investments). 

82. Exclusion of reimbursed employee parking expenses.—Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent accretions to wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from taxable income for employee parking expenses that are paid for by the employer or that are received by the employee in lieu of 

wages. In 2021, the maximum amount of the parking exclusion is $270 per month. The tax expenditure estimate does not include any subsidy provided through employer-owned parking facilities. However, beginning in 2018, parking expenses are no 

longer deductible to employers (except government).

83. Exclusion for employer-provided transit passes.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent accretions to wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for passes, tokens, fare cards, and vanpool expenses that are paid for by an employer or that are received by 

the employee in lieu of wages to defray an employee’s commuting costs. Due to a parity to parking provision, the maximum 

amount of the transit exclusion is $270 per month in 2021. However, beginning in 2018, transit expenses are no longer deductible to employers (except government).

84. Tax credit for certain expenditures for maintaining railroad tracks.—The baseline tax system would not allow credits 

for particular activities, investments, or industries. However, the Tax Code allowed eligible taxpayers to claim a credit equal to 

the lesser of 50 percent of maintenance expenditures and the product of $3,500 and the number of miles of railroad track owned 

or leased. This provision applies to maintenance expenditures in taxable years beginning before January 1, 2017.

85. Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply 

to certain types or sources of income. In contrast, the Tax Code provides for $15 billion of tax-exempt bond authority to finance 

qualified highway or surface freight transfer facilities. 

Community and Regional Development

86. Exclusion of interest for airport, dock, and similar bonds.—The baseline tax system generally would tax all income 

under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources 
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of income. In contrast, the Tax Code allows interest earned on State and local bonds issued to finance high-speed rail facilities 

and Government-owned airports, docks, wharves, and sport and convention facilities to be tax-exempt. These bonds are not 

subject to a volume cap.

87. Exemption of certain mutuals’ and cooperatives’ income.—Under the baseline tax system, corporations pay taxes on 

their profits under the regular tax rate schedule. In contrast, the Tax Code provides for the incomes of mutual and cooperative 

telephone and electric companies to be exempt from tax if at least 85 percent of their receipts are derived from patron service 

charges.

88. Empowerment zones.—The baseline tax system generally would tax all income under the regular tax rate schedule. It 

would not allow preferentially low tax rates to apply to certain types or sources of income, tax credits, and write-offs faster than 

economic depreciation. In contrast, the Tax Code allows qualifying businesses in designated economically depressed areas to 

receive tax benefits such as an employment credit and special tax-exempt financing. A taxpayer’s ability to accrue new tax benefits for empowerment zones expires on December 31, 2025. 

89. New markets tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, the Tax Code allows taxpayers who make qualified equity investments in a community development entity 

(CDE), which then make qualified investments in low-income communities, to be eligible for a tax credit that is received over 7 

years. The total equity investment available for the credit across all CDEs is generally $5 billion for each calendar year 2020

through 2025, the last year for which credit allocations are authorized. 

90. Credit to holders of Gulf and Midwest Tax Credit Bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, under current law taxpayers that own Gulf and Midwest Tax Credit bonds 

receive a non-refundable tax credit rather than interest. The credit is included in gross income.

91. Recovery Zone Bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. In addition, it would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) 

tax rates to apply to certain types or sources of income. In contrast, the Tax Code allowed local governments to issue up $10 

billion in taxable Recovery Zone Economic Development Bonds in 2009 and 2010 and receive a direct payment from Treasury 

equal to 45 percent of interest expenses. In addition, local governments could issue up to $15 billion in tax exempt Recovery 

Zone Facility Bonds. These bonds financed certain kinds of business development in areas of economic distress.

92. Tribal Economic Development Bonds.—The baseline tax system generally would tax all income under the regular tax 

rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, 

the Tax Code was modified in 2009 to allow Indian tribal governments to issue tax exempt “tribal economic development 

bonds.” There is a national bond limitation of $2 billion on such bonds.

93. Opportunity Zones.—The baseline tax system generally would tax all income under the regular tax rate schedule. It 

would not allow deferral or exclusion from income for investments made within certain geographic regions. In contrast, the Tax 

Code allows the temporary deferral of the recognition of capital gain if reinvested prior to December 31, 2026, in a qualifying 

opportunity fund which in turn invests in qualifying low-income communities designated as opportunity zones. For qualifying 

investments held at least 5 years, 10 percent of the deferred gain is excluded from income; this exclusion increases to 15 percent 

for investments held for at least 7 years. In addition, capital gains from the sale or exchange of an investment in a qualified opportunity fund held for at least 10 years are excluded from gross income. 

94. Disaster Employee Retention Credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides employers located in certain presidentially declared disaster areas 

during the years 2017 through 2020 a 40 percent credit for up to $6,000 in wages paid to each eligible employee while the business was inoperable as a result of the disaster. Only wages paid after the disaster occurred and within 150 days of the last day of 

the incident period are eligible for the credit. Employers must reduce their deduction for wages paid by the amount of the credit 

claimed.

Education, Training, Employment, and Social Services

95. Exclusion of scholarship and fellowship income (normal tax method).—Scholarships and fellowships are excluded 

from taxable income to the extent they pay for tuition and course-related expenses of the grantee. Similarly, tuition reductions 

for employees of educational institutions and their families are not included in taxable income. From an economic point of 

view, scholarships and fellowships are either gifts not conditioned on the performance of services, or they are rebates of educational costs. Thus, under the baseline tax system of the reference tax law method, this exclusion is not a tax expenditure because 

this method does not include either gifts or price reductions in a taxpayer’s gross income. The exclusion, however, is considered 

a tax expenditure under the normal tax method, which includes gift-like transfers of Government funds in gross income. (Many 

scholarships are derived directly or indirectly from Government funding.)

96. Tax credits for post-secondary education expenses.—The baseline tax system would not allow credits for particular activities, investments, or industries. Under current law in 2021, however, there are two credits for certain post-secondary education expenses. The American Opportunity Tax Credit (AOTC) allows a partially refundable credit of up to $2,500 per eligible 
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student for qualified tuition and related expenses paid. The AOTC may be claimed during each of the first four years of the student’s post-secondary education. The Lifetime Learning Credit (LLC) allows a non-refundable credit for 20 percent of an eligible student’s qualified tuition and fees, up to a maximum credit of $2,000 per return. The LLC may be claimed during any year 

of the student’s post-secondary education. Only one credit may be claimed per student. The combined credits are phased out for 

taxpayers with modified adjusted gross income between $160,000 and $180,000 if married filing jointly ($80,000 and $90,000 

for other taxpayers), not indexed. Married individuals filing separate returns cannot claim either credit. 

97. Deductibility of student loan interest.—The baseline tax system accepts current law’s general rule limiting taxpayers’ 

ability to deduct non-business interest expenses. In contrast, taxpayers may claim an above-the-line deduction of up to $2,500 

on interest paid on an education loan. In 2021, the maximum deduction is phased down ratably for taxpayers with modified 

AGI between $140,000 and $170,000 if married filing jointly ($70,000 and $85,000 for other taxpayers). Married individuals 

filing separate returns cannot claim the deduction.

98. Qualified tuition programs (includes Education IRA).—The baseline tax system generally would tax all income under 

the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Some States have adopted prepaid tuition plans, prepaid room and board plans, and college savings plans, which allow 

persons to pay in advance or save for college expenses for designated beneficiaries. Under current law, investment income, or 

the return on prepayments, is not taxed when earned, and is tax-exempt when withdrawn to pay for qualified expenses. Beginning in 2018, the definition of a qualified expense was expanded to include up to $10,000 per child per year of expenses for primary or secondary education, including tuition at religious schools.

99. Exclusion of interest on student-loan bonds.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, interest earned on State and local bonds issued to finance student loans is tax-exempt under current law. The volume of all 

such private activity bonds that each State may issue annually is limited.

100. Exclusion of interest on bonds for private nonprofit educational facilities.—The baseline tax system generally would 

tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain 

types or sources of income. In contrast, under current law interest earned on State and local Government bonds issued to finance the construction of facilities used by private nonprofit educational institutions is not taxed.

101. Credit for holders of zone academy bonds.—The baseline tax system would not allow credits for particular activities, 

investments, or industries. Under current law, however, financial institutions that own zone academy bonds receive a nonrefundable tax credit rather than interest. The credit is included in gross income. Proceeds from zone academy bonds may only 

be used to renovate, but not construct, qualifying schools and for certain other school purposes. The total amount of zone academy bonds that may be issued was limited to $1.4 billion in 2009 and 2010. As of March 2010, issuers of the unused authorization of such bonds could opt to receive direct payment with the yield becoming fully taxable. An additional $0.4 billion of these 

bonds with a tax credit was authorized to be issued each year in 2011 through 2016. 

102. Exclusion of interest on savings bonds redeemed to finance educational expenses.—The baseline tax system generally 

would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to 

certain types or sources of income. Under current law, however, interest earned on U.S. savings bonds issued after December 

31, 1989, is tax-exempt if the bonds are transferred to an educational institution to pay for educational expenses. The tax exemption is phased out for taxpayers with AGI between $124,800 and $154,800 if married filing jointly ($83,200 and $98,200 for 

other taxpayers) in 2021.

103. Parental personal exemption for students age 19 or over.—Under the baseline tax system, a personal exemption would 

be allowed for the taxpayer, as well as for the taxpayer’s spouse and dependents who do not claim a personal exemption on 

their own tax returns. These exemptions are repealed for taxable years beginning after December 31, 2017, and before January 

1, 2026. However, the definitions regarding eligibility for dependent exemptions for children (and qualifying relatives), which

determine eligibility for a number of family-related provisions, remain in place. These provisions include the new $500 credit for 

dependents other than qualifying children (Other Dependent Credit, or ODP). In general, to be considered a dependent child, a 

child would have to be under age 19. In contrast, the Tax Code allows taxpayers to consider their children aged 19 to 23 as dependents, as long as the children are full-time students and reside with the taxpayer for over half the year (with exceptions for 

temporary absences from home, such as for school attendance). Absent this provision, children over 18 would need to meet the 

more stringent rules for qualified relatives in order to qualify the taxpayer for certain benefits, including the ODP.

104. Charitable contributions to educational institutions.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code provides taxpayers a deduction for contributions to nonprofit educational institutions that are similar to personal expenditures. Moreover, taxpayers who donate capital assets to educational institutions can 

deduct the asset’s current value without being taxed on any appreciation in value. An individual’s total charitable contribution 

generally may not exceed 50 percent (60 percent for tax years 2018 and 2025) of adjusted gross income; a corporation’s total 

charitable contributions generally may not exceed 10 percent of pre-tax income.

105. Exclusion of employer-provided educational assistance.—Under the baseline tax system, all compensation, including 
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dedicated payments and in-kind benefits, should be included in taxable income because it represents accretions to wealth that 

do not materially differ from cash wages. Under current law, however, employer-provided educational assistance is excluded 

from an employee’s gross income, even though the employer’s costs for this assistance are a deductible business expense. The 

maximum exclusion is $5,250 per taxpayer. From March 27, 2020 through December 31, 2025 employer-provided student loan 

payments are considered eligible educational assistance.

106. Special deduction for teacher expenses.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code allowed educators in both public and private elementary and secondary schools, who worked at 

least 900 hours during a school year as a teacher, instructor, counselor, principal or aide, to subtract up to $250 of qualified expenses, indexed to 2014, when determining their adjusted gross income (AGI).

107. Discharge of student loan indebtedness.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, the Tax Code allows certain professionals who

perform in underserved areas or specific fields, and as a consequence have their student loans discharged, not to recognize such 

discharge as income.

108. Qualified school construction bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, 

the Tax Code was modified in 2009 to provide a tax credit in lieu of interest to holders of qualified school construction bonds. 

The national volume limit is $22.4 billion over 2009 and 2010. As of March 2010, issuers of such bonds could opt to receive 

direct payment with the yield becoming fully taxable.

109. Work opportunity tax credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code 

provides employers with a tax credit for qualified wages paid to individuals. The credit applies to employees who began work 

on or before December 31, 2025 and who are certified as members of various targeted groups. The amount of the credit that can 

be claimed is 25 percent of qualified wages for employment less than 400 hours and 40 percent for employment of 400 hours or 

more. Generally, the maximum credit per employee is $2,400 and can only be claimed on the first year of wages an individual 

earns from an employer. However, the credit for long-term welfare recipients can be claimed on second year wages as well and 

has a $9,000 maximum. Also, certain categories of veterans are eligible for a higher maximum credit of up to $9,600. Employers must reduce their deduction for wages paid by the amount of the credit claimed. 

110. Employer-provided child care exclusion.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, current law allows up to $5,000 of employerprovided child care to be excluded from an employee’s gross income even though the employer’s costs for the child care are a

deductible business expense. The amount is increased to $10,500 for 2021.

111. Employer-provided child care credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, current law provides a credit equal to 25 percent of qualified expenses for employee child 

care and 10 percent of qualified expenses for child care resource and referral services. Employer deductions for such expenses 

are reduced by the amount of the credit. The maximum total credit is limited to $150,000 per taxable year.

112. Assistance for adopted foster children.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. Taxpayers who adopt eligible children from the public foster 

care system can receive monthly payments for the children’s significant and varied needs and a reimbursement of up to $2,000 

for nonrecurring adoption expenses; special needs adoptions receive the maximum benefit even if that amount is not spent. 

These payments are excluded from gross income under current law.

113. Adoption credit and exclusion.—The baseline tax system would not allow credits for particular activities. In contrast, 

taxpayers can receive a tax credit for qualified adoption expenses under current law. Taxpayers may also exclude qualified 

adoption expenses provided or reimbursed by an employer from income, subject to the same maximum amounts and phase-out 

as the credit. The same expenses cannot qualify for tax benefits under both programs; however, a taxpayer may use the benefits 

of the exclusion and the tax credit for different expenses. 

114. Exclusion of employee meals and lodging (other than military).—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. Furthermore, all compensation would 

generally be deductible by the employer. In contrast, under current law employer-provided meals and lodging are excluded 

from an employee’s gross income. Additionally, beginning in 2018, employers are allowed a deduction for only 50 percent of 

the expenses of employer-provided meals, except that in 2021 and 2022, employers are eligible for a full deduction on restaurant 

meals provided to employees. Employer-provided lodging is fully deductible by the employer, in general.

115. Credit for child and dependent care expenses.—The baseline tax system would not allow credits for particular activities or targeted at specific groups. In contrast, the Tax Code provides a tax credit to parents who work or attend school and who 

have child and dependent care expenses. In taxable year 2021 expenditures up to a maximum of $8,000 for one dependent and 

$16,000 for two or more dependents are eligible for the credit. The credit is equal to 50 percent of qualified expenditures for 

taxpayers within incomes up to $125,000. The credit rate is reduced by one percentage point for each $2,000 of income in ex-
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cess of $125,000 until reaching 20 percent. The credit rate is further reduced by one percentage point for each $2,000 of income 

in excess of $400,000 until phasing out completely for incomes in excess of $438,000. The credit is fully refundable. For taxable 

years after 2021 expenditures up to a maximum $3,000 for one dependent and $6,000 for two or more dependents are eligible 

for a nonrefundable credit. The credit is equal to 35 percent of qualified expenditures for taxpayers with incomes of up to 

$15,000. The credit is reduced to a minimum of 20 percent by one percentage point for each $2,000 of income in excess of 

$15,000.

116. Credit for disabled access expenditures.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides small businesses (less than $1 million in gross receipts or fewer than 

31 full-time employees) a 50 percent credit for expenditures in excess of $250 to remove access barriers for disabled persons. 

The credit is limited to $5,000. 

117. Deductibility of charitable contributions, other than education and health.—The baseline tax system would not allow a 

deduction for personal expenditures including charitable contributions. In contrast, the Tax Code provides taxpayers a deduction for contributions to charitable, religious, and certain other nonprofit organizations. Taxpayers who donate capital assets to 

charitable organizations can deduct the assets’ current value without being taxed on any appreciation in value. An individual’s 

total charitable contribution generally may not exceed 50 percent (60 percent between 2018 and 2025) of adjusted gross income; 

a corporation’s total charitable contributions generally may not exceed 10 percent of pre-tax income.

118. Exclusion of certain foster care payments.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Foster 

parents provide a home and care for children who are wards of the State, under contract with the State. Under current law, 

compensation received for this service is excluded from the gross incomes of foster parents; the expenses they incur are nondeductible.

119. Exclusion of parsonage allowances.—Under the baseline tax system, all compensation, including dedicated payments 

and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent accretions to 

wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from a clergyman’s taxable 

income for the value of the clergyman’s housing allowance or the rental value of the clergyman’s parsonage.

120. Indian employment credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code 

provides employers with a tax credit for qualified wages paid to employees who are enrolled members of Indian tribes. The 

amount of the credit that could be claimed is 20 percent of the excess of qualified wages and health insurance costs paid by the 

employer in the current tax year over the amount of such wages and costs paid by the employer in 1993. Qualified wages and 

health insurance costs with respect to any employee for the taxable year could not exceed $20,000. Employees have to live on

or near the reservation where they work to be eligible for the credit. Employers must reduce their deduction for wages paid by 

the amount of the credit claimed. The credit does not apply to taxable years beginning after December 31, 2021.

121. Credit for employer differential wage payments.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides employers with a 20 percent tax credit for eligible differential 

wages paid to employees who are members of the uniformed services while on active duty for more than 30 days. The amount 

of eligible differential wage payments made to a qualified employee in a taxable year is capped at $20,000. Employers must reduce their deduction for wages paid by the amount of the credit claimed.

Health

122. Exclusion of employer contributions for medical insurance premiums and medical care.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, 

under current law, employer-paid health insurance premiums and other medical expenses (including long-term care or Health 

Reimbursement Accounts) are not included in employee gross income even though they are deducted as a business expense by 

the employee.

123. Self-employed medical insurance premiums.—Under the baseline tax system, all compensation and remuneration, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law selfemployed taxpayers may deduct their family health insurance premiums. Taxpayers without self-employment income are not 

eligible for this special deduction. The deduction is not available for any month in which the self-employed individual is eligible 

to participate in an employer-subsidized health plan and the deduction may not exceed the self-employed individual’s earned 

income from self-employment.

124. Medical Savings Accounts and Health Savings Accounts.—Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, should be included in taxable income. Also, the baseline tax system would not allow a 

deduction for personal expenditures and generally would tax investment earnings. In contrast, individual contributions to Archer Medical Savings Accounts (Archer MSAs) and Health Savings Accounts (HSAs) are allowed as a deduction in determining 

adjusted gross income whether or not the individual itemizes deductions. Employer contributions to Archer MSAs and HSAs 
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are excluded from income and employment taxes. Archer MSAs and HSAs require that the individual have coverage by a qualifying high deductible health plan. Earnings from the accounts are excluded from taxable income. Distributions from the accounts used for medical expenses are not taxable. The rules for HSAs are generally more flexible than for Archer MSAs and the 

deductible contribution amounts are greater (in 2019, $3,500 for taxpayers with individual coverage and $7,000 for taxpayers 

with family coverage). Thus, HSAs have largely replaced MSAs.

125. Deductibility of medical expenses.—The baseline tax system would not allow a deduction for personal expenditures. 

In contrast, under current law personal expenditures for medical care (including the costs of prescription drugs) exceeding 7.5 

percent of the taxpayer’s adjusted gross income are deductible. For tax years beginning after 2012, only medical expenditures 

exceeding 10 percent of the taxpayer’s adjusted gross income are deductible. However, for the years 2013, 2014, 2015 and 2016, 

if either the taxpayer or the taxpayer’s spouse turned 65 before the end of the taxable year, the threshold remained at 7.5 percent 

of adjusted income. Beginning in 2017, the 10 percent threshold applied to all taxpayers, including those over 65.

126. Exclusion of interest on hospital construction bonds.—The baseline tax system generally would tax all income under 

the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, under current law interest earned on State and local government debt issued to finance hospital construction 

is excluded from income subject to tax.

127. Refundable Premium Assistance Tax Credit.—The baseline tax system would not allow credits for particular activities 

or targeted at specific groups. In contrast, for taxable years ending after 2013, the Tax Code provides a premium assistance 

credit to any eligible taxpayer for any qualified health insurance purchased through a Health Insurance Exchange. In general, 

an eligible taxpayer is a taxpayer with annual household income between 100 percent and 400 percent of the federal poverty 

level for a family of the taxpayer’s size and that does not have access to affordable minimum essential health care coverage. The 

amount of the credit equals the lesser of (1) the actual premiums paid by the taxpayer for such coverage or (2) the difference 

between the cost of a statutorily-identified benchmark plan offered on the exchange and a required payment by the taxpayer 

that increases with income. The American Rescue Plan Act of 2021 (P.L. 117-2) temporarily increased the Premium Tax Credit 

in three ways. For 2021 and 2022, the legislation increased the Premium Tax Credit for currently eligible individuals and families, providing access to free plans for those earning 100 to 150 percent of the federal poverty level, and expanded eligibility to 

newly include individuals and families with income above 400 percent of the federal poverty level. The legislation also expanded eligibility in 2021 to individuals who receive unemployment insurance for any week in 2021. The legislation also eliminated 

the requirement for individuals to repay any excess advance payments of the Premium Tax Credit for 2020.

128. Credit for employee health insurance expenses of small business.—The baseline tax system would not allow credits for 

particular activities or targeted at specific groups. In contrast, the Tax Code provides a tax credit to qualified small employers 

that make a certain level of non-elective contributions towards the purchase of certain health insurance coverage for its employees. To receive a credit, an employer must have fewer than 25 full-time-equivalent employees whose average annual full-timeequivalent wages from the employer are less than $50,000 (indexed for taxable years after 2013). However, to receive a full credit, an employer must have no more than 10 full-time employees, and the average wage paid to these employees must be no 

more than $25,000 (indexed for taxable years after 2013). A qualifying employer may claim the credit for any taxable year beginning in 2010, 2011, 2012, and 2013 and for up to two years for insurance purchased through a Health Insurance Exchange 

thereafter. For taxable years beginning in 2010, 2011, 2012, and 2013, the maximum credit is 35 percent of premiums paid by 

qualified taxable employers and 25 percent of premiums paid by qualified tax-exempt organizations. For taxable years beginning in 2014 and later years, the maximum tax credit increases to 50 percent of premiums paid by qualified taxable employers

and 35 percent of premiums paid by qualified tax-exempt organizations.

129. Deductibility of charitable contributions to health institutions.—The baseline tax system would not allow a deduction 

for personal expenditures including charitable contributions. In contrast, the Tax Code provides individuals and corporations a 

deduction for contributions to nonprofit health institutions. Tax expenditures resulting from the deductibility of contributions to 

other charitable institutions are listed under the education, training, employment, and social services function.

130. Tax credit for orphan drug research.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, under current law drug firms can claim a tax credit of 25 percent of the costs for clinical 

testing required by the Food and Drug Administration for drugs that treat rare physical conditions or rare diseases.

131. Special Blue Cross/Blue Shield tax benefits.—The baseline tax system generally would tax all profits under the regular 

tax rate schedule using broadly applicable measures of baseline income. It would not allow preferentially low tax rates to apply 

to certain types or sources of income. In contrast, certain Blue Cross and Blue Shield (BC/BS) health insurance providers and 

certain other health insurers are provided with special tax benefits, provided that their percentage of total premium revenue expended on reimbursement for clinical services provided to enrollees or for activities that improve health care quality is not less 

than 85 percent for the taxable year. A qualifying insurer may take as a deduction 100 percent of any net increase in its unearned premium reserves, instead of the 80 percent allowed other insurers. A qualifying insurer is also allowed a special deduction equal to the amount by which 25 percent of its health-claim expenses exceeds its beginning-of-the-year accounting surplus. 

The deduction is limited to the insurer’s taxable income determined without the special deduction.
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132. Distributions from retirement plans for premiums for health and long-term care insurance.—Under the baseline tax 

system, all compensation, including dedicated and deferred payments, should be included in taxable income. In contrast, the 

Tax Code provides for tax-free distributions of up to $3,000 from governmental retirement plans for premiums for health and

long term care premiums of public safety officers.

133. Credit for family and sick leave taken by self-employed individuals.—The baseline tax system would not allow credits for 

particular activities or targeted as specific groups. Under current law, however, self-employed individuals are allowed a refundable credit equal for certain family or sick leave taken. In general, the sick leave credit is equal to 100% of daily self-employment 

income (equal to self-employment income divided by 260) during a period of qualified sick leave, up to $511 per day for 10 

days. The family leave credit is equal to two thirds of daily self-employment income (but no greater than two thirds of $200) 

during a period of qualified family leave for up to 10 weeks. Under current law, the credit applies to leave taken prior to April 1, 

2021.

Income Security

134. Child credit.—The baseline tax system would not allow credits for particular activities or targeted at specific groups. 

Under current law, however, taxpayers with children under age 18 can qualify for a child credit. In taxable year 2021 taxpayers 

may claim a credit for up to $3,600 per child under six and up to $3,000 per child age six through 17. To be eligible for the child 

credit, the child must have a Social Security Number (SSN). The credit is fully refundable: the full amount of any credit unclaimed due to insufficient tax liability is refundable as an additional child credit. Taxpayers may claim a refund even if they do 

not have earnings or income. A taxpayer may also claim a nonrefundable credit of $500 for each qualifying child not eligible for 

the child credit (those over seventeen and those without SSNs) and for each dependent relative. The first $1,600 ($1,000 for 

those six and over) of the child credit per child phases out sequentially at the rate of $50 per $1,000 of modified AGI above 

$150,000 ($112.500 head of household filers and $75,000 for all other filers). Larger families follow a modified phaseout rule 

extending this range. The combined credit for other dependents and the remaing $2,000 per child of the child credit is phased 

out for taxpayers at the rate of $50 per $1,000 of modified AGI above $400,000 ($200,000 for single or head of household filers 

and $200,000 for married taxpayers filing separately). A taxpayer may receive up to 50 percent of their otherwise allowable 

credit based on information reported on their 2020 individual return, or their 2019 return if the 2020 return is unavailable. Safe 

harbor rules protect moderate income taxpayers who receive an advance but are not elibile based on their 2021 return. In taxable years 2022 through 2025, taxpayers may claim a $2,000 per child partially refundable child credit. Up to $1,400 per child of 

unclaimed credit due to insufficient tax liability may be refundable—taxpayers may claim a refund for 15 percent of earnings in 

excess of a $2,500 floor, up to the lesser of the amount of unused credit or $1,400 per child. To be eligible for the child credit,

the child must have a Social Security Number (SSN). A taxpayer may also claim a nonrefundable credit of $500 for each qualifying child not eligible for the $2,000 credit (those over sixteen and those without SSNs) and for each dependent relative. The 

total combined child and other dependent credit is phased out for taxpayers at the rate of $50 per $1,000 of modified AGI above 

$400,000 ($200,000 for single or head of household filers and $200,000 for married taxpayers filing separately). For tax years 

beginning after December 31, 2025, the credit returns to its pre-TCJA value of $1,000. At that time, up to the full value of the 

credit (subject to a phase-in of 15 percent of earnings in excess of $3,000) will be refundable and the $500 other dependent credit 

will expire. The credit will once again phase out at the rate of $50 per $1,000 of modified AGI above $110,000 ($75,000 for single or head of household filers and $55,000 for married taxpayers filing separately). The social security requirement will remain

in place.

135. Exclusion of railroad Social Security equivalent benefits.—Under the baseline tax system, all compensation, including 

dedicated and deferred payments, should be included in taxable income. In contrast, the Social Security Equivalent Benefit paid 

to railroad retirees and the disabled is not generally subject to the income tax unless the recipient’s modified gross income 

reaches a certain threshold under current law. See provision number 157, Social Security benefits for retired and disabled workers and spouses, dependents, and survivors, for a discussion of the threshold.

136. Exclusion of workers’ compensation benefits.—Under the baseline tax system, all compensation, including dedicated 

payments and in-kind benefits, should be included in taxable income. However, workers compensation is not subject to the income tax under current law.

137. Exclusion of public assistance benefits (normal tax method).—Under the reference tax law baseline, gifts and transfers 

are not treated as income to the recipients. In contrast, the normal tax method considers cash transfers from the Government as 

part of the recipients’ income, and thus, treats the exclusion for public assistance benefits under current law as a tax expenditure. 

138. Exclusion of special benefits for disabled coal miners.—Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, should be included in taxable income. However, disability payments to former coal 

miners out of the Black Lung Trust Fund, although income to the recipient, are not subject to the income tax.

139. Exclusion of military disability pensions.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, most of the military disability pension income 
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received by current disabled military retirees is excluded from their income subject to tax.

140. Defined benefit employer plans.—Under the baseline tax system, all compensation, including deferred and dedicated

payments, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, under 

current law certain contributions to defined benefit pension plans are excluded from an employee’s gross income even though 

employers can deduct their contributions. In addition, the tax on the investment income earned by defined benefit pension 

plans is deferred until the money is withdrawn.

141. Defined contribution employer plans.—Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, 

under current law individual taxpayers and employers can make tax-preferred contributions to employer-provided 401(k) and 

similar plans (e.g. 403(b) plans and the Federal Government’s Thrift Savings Plan). In 2020, an employee could exclude up to 

$19,500 of wages from AGI under a qualified arrangement with an employer’s 401(k) plan. Employees age 50 or over could 

exclude up to $26,000 in contributions. The defined contribution plan limit, including both employee and employer contributions, is $57,000 in 2020. The tax on contributions made by both employees and employers and the investment income earned 

by these plans is deferred until withdrawn.

142. Individual Retirement Accounts (IRAs).—Under the baseline tax system, all compensation, including deferred and 

dedicated payments, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, under current law individual taxpayers can take advantage of traditional and Roth IRAs to defer or otherwise reduce the 

tax on the return to their retirement savings. The IRA contribution limit is $6,000 in 2020; taxpayers age 50 or over are allowed 

to make additional “catch-up’’ contributions of $1,000. Contributions to a traditional IRA are generally deductible but the deduction is phased out for workers with incomes above certain levels if the workers or their spouses are active participants in an 

employer-provided retirement plan. Contributions and account earnings are includible in income when withdrawn from traditional IRAs. Roth IRA contributions are not deductible, but earnings and withdrawals are exempt from taxation. Income limits 

also apply to Roth IRA contributions.

143. Low and moderate-income savers’ credit.—The baseline tax system would not allow credits for particular activities or 

targeted at specific groups. In contrast, the Tax Code provides an additional incentive for lower-income taxpayers to save 

through a nonrefundable credit of up to 50 percent on IRA and other retirement contributions of up to $2,000. This credit is in 

addition to any deduction or exclusion. The credit is completely phased out by $65,000 for joint filers, $48,750 for head of 

household filers, and $32,500 for other filers in 2020. 

144. Self-employed plans.—Under the baseline tax system, all compensation, including deferred and dedicated payments, 

should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, under current law 

self-employed individuals can make deductible contributions to their own retirement plans equal to 25 percent of their income, 

up to a maximum of $57,000 in 2020. Total plan contributions are limited to 25 percent of a firm’s total wages. The tax on the 

investment income earned by self-employed SEP, SIMPLE, and qualified plans is deferred until withdrawn.

145. Premiums on group term life insurance.—Under the baseline tax system, all compensation, including deferred and 

dedicated payments, should be included in taxable income. In contrast, under current law employer-provided life insurance 

benefits are excluded from an employee’s gross income (to the extent that the employer’s share of the total costs does not exceed the cost of $50,000 of such insurance) even though the employer’s costs for the insurance are a deductible business expense.

146. Premiums on accident and disability insurance.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law employer-provided accident and disability benefits are excluded from an employee’s gross income even though the employer’s costs for the benefits 

are a deductible business expense.

147. Exclusion of investment income from Supplementary Unemployment Benefit Trusts.—Under the baseline tax system, 

all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In addition, investment income would be taxed as earned. Under current law, employers may establish trusts to pay supplemental unemployment benefits to employees separated from employment. Investment income earned by such trusts is exempt from taxation.

148. Exclusion of investment income from Voluntary Employee Benefit Associations trusts.—Under the baseline tax system, 

all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. Under current law, 

employers may establish associations, or VEBAs, to pay employee benefits, which may include health benefit plans, life insurance, and disability insurance, among other employee benefits. Investment income earned by such trusts is exempt from taxation.

149. Special Employee Stock Ownership Plan (ESOP) rules.— Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, should be included in taxable income. In addition, investment income would be taxed 

as earned. In contrast, employer-paid contributions (the value of stock issued to the ESOP) are deductible by the employer as 

part of employee compensation costs. They are not included in the employees’ gross income for tax purposes, however, until 

they are paid out as benefits. In addition, the following special income tax provisions for ESOPs are intended to increase own-
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ership of corporations by their employees: (1) annual employer contributions are subject to less restrictive limitations than other 

qualified retirement plans; (2) ESOPs may borrow to purchase employer stock, guaranteed by their agreement with the employer that the debt will be serviced by the payment (deductible by firm) of a portion of wages (excludable by the employees) to service the loan; (3) employees who sell appreciated company stock to the ESOP may defer any taxes due until they withdraw 

benefits; (4) dividends paid to ESOP-held stock are deductible by the employer; and (5) earnings are not taxed as they accrue.

150. Additional deduction for the blind.—Under the baseline tax system, the standard deduction is allowed. An additional 

standard deduction for a targeted group within a given filing status would not be allowed. In contrast, the Tax Code allows taxpayers who are blind to claim an additional $1,700 standard deduction if single, or $1,350 if married in 2021.

151. Additional deduction for the elderly.—Under the baseline tax system, the standard deduction is allowed. An additional standard deduction for a targeted group within a given filing status would not be allowed. In contrast, the Tax Code allows 

taxpayers who are 65 years or older to claim an additional $1,700 standard deduction if single, or $1,350 if married in 2021.

152. Deductibility of casualty losses.—Under the baseline tax system, neither the purchase of property nor insurance premiums to protect the property’s value are deductible as costs of earning income. Therefore, reimbursement for insured loss of 

such property is not included as a part of gross income, and uninsured losses are not deductible. In contrast, the Tax Code provides a deduction for uninsured casualty and theft losses of more than $100 each, to the extent that total losses during the year 

exceed 10 percent of the taxpayer’s adjusted gross income. In the case of taxable years beginning after December 31, 2017, and 

before January 1, 2026, personal casualty losses are deductible only to the extent they are attributable to a Federally declared 

disaster area.

153. Earned income tax credit (EITC).—The baseline tax system would not allow credits for particular activities or targeted at specific groups. In contrast, the Tax Code provides an EITC to low-income workers at a maximum rate of 45 percent of 

income. In 2021, for a family with one qualifying child, the credit is 34 percent of the first $10,640 of earned income. The credit 

is 40 percent of the first $14,950 of income for a family with two qualifying children, and it is 45 percent of the first $14,950 of 

income for a family with three or more qualifying children. Low-income workers with no qualifying children are eligible for a 

15.3 percent credit on the first $9,820 of earned income. The credit plateaus and then phases out with the greater of AGI or 

earnings at income levels and rates which depend upon how many qualifying children are eligible and marital status. In 2021, 

the phase-down for married filers begins at incomes $5,950 ($5,940 for filers without children) greater than for otherwise similar 

unmarried filers. Earned income tax credits in excess of tax liabilities owed through the individual income tax system are refundable to individuals. Beginning in 2018, the parameters of the EITC are indexed by the chained CPI, which results in a 

smaller inflation adjustment than previously. This change is permanent.

154. Recovery rebate credits.—The baseline tax system would not allow credits for particular activities or targeted at specific 

groups. In contrast, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided rebates of $1,200 ($2,400 for 

married couples filing jointly) and 500 per child. The total rebate amount begins phasing out at adjusted gross income over 

$75,000 ($150,000 for married couples filing jointly, $112,500 heads of household). This was followed by the Consolidated Appropriations Act which provided rebates of $600 per eligible taxpayer ($1,200 for married couples filing jointly) plus an additional $600 per child, with phase out features similar to CARES. The American Rescue Plan act provided another rebate credit 

of $1,400 ($2,800 for married couples filing jointly) and $1,400 per dependent in 2021. The phase out begins at the same thresholds as the CARES Act, but the full credit is phased out proportionately by $80,000 of AGI ($160,000 for married couples filing 

jointly, $120,000 for heads of household). 

155. Exemption of unemployment insurance benefits.— Under the baseline tax system, all compensation, including dedicated 

payments and in-kind benefits, should be included in tax-able income. In contrast, under current law for 2021 unemplyment 

insurance benefits up to $10,200 are excluded from recipient gross. 

Social Security

156. Social Security benefits for retired and disabled workers and spouses, dependents, and survivors.—The baseline tax system would tax Social Security benefits to the extent that contributions to Social Security were not previously taxed. Thus, the 

portion of Social Security benefits that is attributable to employer contributions and to earnings on employer and employee contributions (and not attributable to employee contributions which are taxed at the time of contribution) would be subject to tax. 

In contrast, the Tax Code may not tax all of the Social Security benefits that exceed the beneficiary’s contributions from previously taxed income. Actuarially, previously taxed contributions generally do not exceed 15 percent of benefits, even for retirees 

receiving the highest levels of benefits. Therefore, up to 85 percent of recipients’ Social Security and Railroad Social Security 

Equivalent retirement benefits are included in (phased into) the income tax base if the recipient’s provisional income exceeds 

certain base amounts. (Provisional income is equal to other items included in adjusted gross income plus foreign or U.S. possession income, tax-exempt interest, and one half of Social Security and Railroad Social Security Equivalent retirement benefits.) 

The untaxed portion of the benefits received by taxpayers who are below the income amounts at which 85 percent of the benefits are taxable is counted as a tax expenditure. Benefits paid to disabled workers and to spouses, dependents, and survivors are 
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

treated in a similar manner. Railroad Social Security Equivalent benefits are treated like Social Security benefits. See also provision number 137, Exclusion of Railroad Social Security Equivalent Benefits.

157. Credit for certain employer social security contributions.—Under the baseline tax system, employer contributions to 

Social Security represent labor cost and are deductible expenses. Under current law, however, certain employers are allowed a 

tax credit, instead of a deduction, against taxes paid on tips received from customers in connection with the providing, delivering, or serving of food or beverages for consumption. The tip credit equals the full amount of the employer’s share of FICA taxes paid on the portion of tips, when added to the employee’s non-tip wages, in excess of $5.15 per hour. The credit is available 

only with respect to FICA taxes paid on tips.

Veterans Benefits and Services

158. Exclusion of veterans death benefits and disability compensation.—Under the baseline tax system, all compensation, 

including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to 

wealth that do not materially differ from cash wages. In contrast, all compensation due to death or disability paid by the Veterans Administration is excluded from taxable income under current law.

159. Exclusion of veterans pensions.—Under the baseline tax system, all compensation, including dedicated payments and 

in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ 

from cash wages. Under current law, however, pension payments made by the Veterans Administration are excluded from 

gross income.

160. Exclusion of G.I. Bill benefits.—Under the baseline tax system, all compensation, including dedicated payments and 

in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ 

from cash wages. Under current law, however, G.I. Bill benefits paid by the Veterans Administration are excluded from gross 

income.

161. Exclusion of interest on veterans housing bonds.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. 

In contrast, under current law, interest earned on general obligation bonds issued by State and local governments to finance 

housing for veterans is excluded from taxable income.

General Government

162. Exclusion of interest on public purpose State and local bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or 

sources of income. In contrast, under current law interest earned on State and local government bonds issued to finance publicpurpose construction (e.g., schools, roads, sewers), equipment acquisition, and other public purposes is tax-exempt. Interest on 

bonds issued by Indian tribal governments for essential governmental purposes is also tax-exempt.

163. Build America Bonds.—The baseline tax system would not allow credits for particular activities or targeted at specific 

groups. In contrast, the Tax Code in 2009 allowed State and local governments to issue taxable bonds through 2010 and receive 

a direct payment from Treasury equal to 35 percent of interest expenses. Alternatively, State and local governments could issue 

taxable bonds and the private lenders receive the 35 percent credit which is included in taxable income.

164. Deductibility of nonbusiness State and local taxes other than on owner-occupied homes.—Under the baseline tax system, a deduction for personal consumption expenditures would not be allowed. In contrast, the Tax Code allows taxpayers who 

itemize their deductions to claim a deduction for State and local income taxes (or, at the taxpayer’s election, State and local 

sales taxes) and property taxes, even though these taxes primarily pay for services that, if purchased directly by taxpayers, 

would not be deductible. (The estimates for this tax expenditure do not include the estimates for the deductibility of State and 

local property tax on owner-occupied homes. See item 56.) In the case of taxable years beginning after December 31, 2017, and 

before January 1, 2026, (1) the deduction for foreign real property taxes paid is disallowed and (2) the deduction for taxes paid 

in any taxable year, which includes the deduction for property taxes on real property, is limited to $10,000 ($5,000 in the case of 

a married individual filing a separate return).

Interest

165. Deferral of interest on U.S. savings bonds.—The baseline tax system would uniformly tax all returns to investments

and not allow an exemption or deferral for particular activities, investments, or industries. In contrast, taxpayers may defer paying tax on interest earned on U.S. savings bonds until the bonds are redeemed.
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 13,940 14,500 15,050 15,630 14,390 14,540 15,060 15,720 16,430 17,200 18,020 156,540

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,470 6,790 7,130 7,490 7,860 8,260 8,670 9,100 9,560 10,040 10,540 85,440

3 Exclusion of certain allowances for Federal employees abroad 280 290 310 320 340 360 370 390 410 430 450 3,670

4 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 19,520 33,810 36,350 38,870 41,180 36,720 34,220 35,280 35,990 36,830 37,720 366,970

5 Deduction for foreign-derived intangible income dervied from trade or business within the Unit 6,840 11,900 12,790 13,680 14,490 9,130 9,590 9,890 10,090 10,320 10,580 112,460

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 990 1,520 1,590 1,670 1,770 2,040 2,280 2,410 2,520 2,630 2,750 21,180

General science, space, and technology: 

7 Expensing of research and experimentation expenditures (normal tax method) 6,420 -22,210 -39,660 -28,680 -17,470 -5,540 0 0 0 0 0 -113,560

8 Credit for increasing research activities 18,520 20,400 22,020 23,500 24,940 26,380 27,850 29,350 30,900 32,520 34,210 272,070

Energy: 

9 Expensing of exploration and development costs, fuels -50 90 220 350 390 420 440 450 460 460 440 3,720

10 Excess of percentage over cost depletion, fuels 620 720 790 830 870 940 1,010 1,090 1,150 1,210 1,270 9,880

11 Exception from passive loss limitation for working interests in oil and gas properties 20 20 20 20 20 20 20 20 20 20 20 200

12 Capital gains treatment of royalties on coal 70 50 50 50 50 60 60 60 70 70 70 590

13 Exclusion of interest on energy facility bonds 10 10 10 10 10 10 10 10 10 10 10 100

14 Enhanced oil recovery credit 510 400 370 590 800 990 1,190 1,340 1,400 1,450 1,490 10,020

15 Energy production credit 5,290 5,220 5,510 5,900 6,170 5,910 5,730 5,410 5,020 4,400 3,660 52,930

16 Marginal wells credit 250 270 220 230 290 370 410 440 450 460 470 3,610

17 Energy investment credit 6,360 7,210 7,010 7,610 7,770 7,170 7,070 5,700 4,580 3,270 2,590 59,980

18 Alcohol fuel credits 1/ 10 0 0 0 0 0 0 0 0 0 0 0

19 Bio-Diesel and small agri-biodiesel producer tax credits 2/ 40 40 20 0 0 0 0 0 0 0 0 60

20 Tax credits for clean-fuel burning vehicles and refueling property 450 580 550 470 460 440 360 310 290 280 270 4,010

21 Exclusion of utility conservation subsidies 60 50 50 50 40 40 40 30 30 30 30 390

22 Credit for holding clean renewable energy bonds 3/ 70 70 70 70 70 70 70 70 70 70 70 700

23 Credit for investment in clean coal facilities 0 0 10 20 40 40 40 30 30 20 20 250

24 Amortize all geological and geophysical expenditures over 2 years 110 120 120 140 140 140 140 140 130 120 120 1,310

25 Allowance of deduction for certain energy efficient commercial building property 210 140 120 120 120 130 130 130 130 130 130 1,280

26 Credit for construction of new energy efficient homes 370 280 260 250 260 270 170 60 20 0 0 1,570

27 Credit for energy efficiency improvements to existing homes 240 120 0 0 0 0 0 0 0 0 0 120

28 Credit for residential energy efficient property 2,590 2,200 1,640 480 140 0 0 0 0 0 0 4,460

29 Qualified energy conservation bonds 4/ 30 30 30 30 30 30 30 30 30 30 30 300

30 Advanced Energy Property Credit 10 10 10 10 10 10 10 10 10 10 0 90

31 Advanced nuclear power production credit 0 30 140 210 240 270 280 280 280 230 100 2,060

32 Reduced tax rate for nuclear decommissioning funds 110 110 120 120 130 130 140 150 150 160 170 1,380

Natural resources and environment: 

33 Expensing of exploration and development costs, nonfuel minerals 0 10 10 20 40 40 40 40 40 40 40 320

34 Excess of percentage over cost depletion, nonfuel minerals 110 120 140 140 150 160 180 200 200 220 220 1,730

35 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 350 360 350 360 360 390 400 400 430 420 430 3,900

36 Capital gains treatment of certain timber income 140 140 150 150 160 170 190 200 210 220 230 1,820

37 Expensing of multiperiod timber growing costs 210 220 220 240 240 250 260 280 280 290 300 2,580

38 Tax incentives for preservation of historic structures 610 580 670 810 910 980 1,020 1,030 1,040 1,060 1,070 9,170

39 Carbon oxide sequestration credit 460 580 720 820 1,020 1,310 2,180 2,970 3,250 3,570 3,710 20,130

40 Deduction for endangered species recovery expenditures 30 30 30 40 40 40 60 60 60 70 70 500

Agriculture: 

41 Expensing of certain capital outlays 110 120 130 130 140 170 190 200 200 210 220 1,710

42 Expensing of certain multiperiod production costs 320 270 280 290 310 380 420 440 460 480 500 3,830

43 Treatment of loans forgiven for solvent farmers 50 60 60 60 60 70 70 70 70 70 70 660

44 Capital gains treatment of certain agriculture income 1,370 1,440 1,500 1,540 1,610 1,750 1,890 1,980 2,080 2,180 2,280 18,250

45 Income averaging for farmers 190 200 200 210 220 230 230 230 230 230 230 2,210

46 Deferral of gain on sale of farm refiners 20 20 20 20 20 20 20 20 20 20 20 200

47 Expensing of reforestation expenditures 50 60 60 60 70 70 80 80 80 80 80 720

Commerce and housing: 

Financial institutions and insurance: 

48 Exemption of credit union income 2,080 2,120 2,170 2,350 2,410 2,450 2,650 2,740 2,790 2,830 2,820 25,330

49 Exclusion of life insurance death benefits 11,970 12,910 13,400 14,130 14,930 15,890 16,850 17,140 17,700 18,180 18,590 159,720

50 Exemption or special alternative tax for small property and casualty insurance companies 1,050 1,170 1,210 1,240 1,270 1,300 1,350 1,380 1,410 1,470 1,510 13,310

51 Tax exemption of insurance income earned by tax-exempt organizations 330 350 360 370 370 380 390 390 400 410 420 3,840

52 Exclusion of interest spread of financial institutions 3,110 2,030 2,100 2,170 2,260 2,400 2,530 2,600 2,690 2,780 2,860 24,420

Housing: 

53 Exclusion of interest on owner-occupied mortgage subsidy bonds 910 920 890 920 920 1,000 1,040 1,050 1,140 1,090 1,130 10,100

54 Exclusion of interest on rental housing bonds 1,540 1,560 1,510 1,550 1,560 1,690 1,750 1,780 1,930 1,830 1,910 17,070

55 Deductibility of mortgage interest on owner-occupied homes 29,370 30,340 31,340 33,530 36,770 79,990 105,190 111,260 117,100 123,350 129,490 798,360

56 Deductibility of State and local property tax on owner-occupied homes 17/ 6,740 7,030 7,070 7,290 7,700 39,370 57,270 60,230 63,060 66,110 69,310 384,440

57 Deferral of income from installment sales 1,490 1,560 1,620 1,670 1,730 1,800 1,870 1,940 2,020 2,110 2,200 18,520

58 Capital gains exclusion on home sales 40,900 42,730 44,640 46,410 48,110 53,260 56,890 58,980 61,240 63,650 66,210 542,120

59 Exclusion of net imputed rental income 124,100 130,880 135,350 137,800 139,670 168,950 176,240 183,760 191,740 200,200 209,370 1,673,960

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from corporations and individuals
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

60 Exception from passive loss rules for $25,000 of rental loss 5,910 5,940 6,200 6,460 6,980 7,720 8,010 8,260 8,480 8,750 9,080 75,880

61 Credit for low-income housing investments 8,900 11,280 10,540 10,380 10,340 10,410 10,690 10,970 11,250 11,550 11,850 109,260

62 Accelerated depreciation on rental housing (normal tax method) 4,390 4,430 4,550 4,820 5,160 5,720 6,310 6,740 7,060 7,260 7,490 59,540

63 Discharge of mortgage indebtedness 250 270 280 290 310 80 0 0 0 0 0 1,230

64 Premiums for mortgage insurance deductible as interest 580 150 0 0 0 0 0 0 0 0 0 150

Commerce: 

65 Discharge of business indebtedness 30 40 20 20 10 30 30 30 30 40 40 290

66 Exceptions from imputed interest rules 20 30 40 50 50 60 70 70 80 80 80 610

67 Treatment of qualified dividends 31,650 33,120 34,660 35,880 37,560 40,660 43,600 45,580 47,870 50,100 52,400 421,430

68 Capital gains (except agriculture, timber, iron ore, and coal) 102,250 107,710 111,640 115,280 119,950 130,650 141,370 147,950 155,320 162,550 170,430 1,362,850

69 Capital gains exclusion of small corporation stock 1,520 1,620 1,740 1,830 1,900 1,970 2,040 2,110 2,200 2,290 2,390 20,090

70 Step-up basis of capital gains at death 41,850 43,910 46,060 48,480 51,420 53,990 58,580 62,250 66,070 70,270 74,830 575,860

71 Carryover basis of capital gains on gifts 3,400 4,290 4,360 4,610 4,650 5,240 5,890 5,700 5,590 5,590 5,670 51,590

72 Ordinary income treatment of loss from small business corporation stock sale 70 70 70 80 80 80 80 90 90 90 90 820

73 Deferral of gains from like-kind exchanges 3,520 3,690 3,870 4,060 4,260 4,480 4,690 4,930 5,180 5,430 5,710 46,300

74 Depreciation of buildings other than rental housing (normal tax method) 3,700 3,470 3,040 2,800 2,680 2,620 2,520 2,580 2,690 2,730 2,860 27,990

75 Accelerated depreciation of machinery and equipment (normal tax method) 31,470 26,180 11,510 -2,550 -14,470 -25,430 -37,190 -29,250 -15,150 -6,710 -1,390 -94,450

76 Expensing of certain small investments (normal tax method) -1,580 -760 3,470 6,980 9,400 12,340 15,400 14,330 12,040 10,840 10,270 94,310

77 Exclusion of interest on small issue bonds 100 100 90 90 90 110 110 110 120 120 120 1,060

78 Special rules for certain film and TV production -50 0 100 180 240 -390 -530 -260 -120 -50 -20 -850

79 Allow 20-percent deduction to certain pass-through income 33,780 56,070 56,700 59,150 63,030 25,910 0 0 0 0 0 260,860

Transportation: 

80 Tonnage tax 100 110 110 110 120 120 120 130 130 140 140 1,230

81 Deferral of tax on shipping companies 10 10 10 10 10 10 10 10 10 10 10 100

82 Exclusion of reimbursed employee parking expenses 1,460 1,740 2,090 2,150 2,220 2,330 2,440 2,550 2,670 2,850 3,040 24,080

83 Exclusion for employer-provided transit passes 290 360 440 470 490 530 570 610 660 750 840 5,720

84 Tax credit for certain expenditures for maintaining railroad tracks 170 170 130 80 60 40 30 30 20 10 10 580

85 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 250 250 230 230 210 200 190 180 170 160 150 1,970

Community and regional development: 

86 Exclusion of interest for airport, dock, and similar bonds 920 930 900 930 930 1,010 1,040 1,060 1,150 1,100 1,140 10,190

87 Exemption of certain mutuals' and cooperatives' income 90 100 100 100 100 110 110 110 110 120 120 1,080

88 Empowerment zones 130 90 100 110 110 90 60 40 20 20 20 660

89 New markets tax credit 1,140 1,170 1,210 1,250 1,310 1,360 1,340 1,230 1,060 870 640 11,440

90 Credit to holders of Gulf Tax Credit Bonds. 120 110 100 90 80 80 80 70 60 60 50 780

91 Recovery Zone Bonds 5/ 110 100 90 80 80 70 70 60 60 50 40 700

92 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 10 100

93 Opportunity Zones 2,990 3,490 2,100 2,180 2,070 -5,580 -11,220 590 780 990 1,120 -3,480

94 Employee retention credit 160 160 90 60 60 50 40 40 30 30 20 580

Education, training, employment, and social services: 

Education: 

95 Exclusion of scholarship and fellowship income (normal tax method) 3,790 4,140 4,280 4,520 4,800 5,370 6,230 6,590 6,980 7,380 7,800 58,090

96 Tax credits and deductions for postsecondary education expenses 6/ 9,250 14,620 14,380 14,320 14,180 14,070 14,130 13,900 13,670 13,430 13,200 139,900

97 Deductibility of student-loan interest 2,110 2,260 2,190 2,280 2,330 2,530 2,880 2,920 3,040 3,060 3,100 26,590

98 Qualified tuition programs (includes Education IRA) 2,790 2,970 3,200 3,570 4,060 4,980 5,980 7,090 8,550 10,500 13,070 63,970

99 Exclusion of interest on student-loan bonds 180 180 180 180 180 200 200 210 220 220 220 1,990

100 Exclusion of interest on bonds for private nonprofit educational facilities 2,450 2,470 2,400 2,460 2,480 2,690 2,780 2,820 3,070 2,920 3,030 27,120

101 Credit for holders of zone academy bonds 7/ 290 270 250 230 200 180 180 160 160 140 140 1,910

102 Exclusion of interest on savings bonds redeemed to finance educational expenses 40 40 40 40 40 50 50 50 50 50 50 460

103 Parental personal exemption for students age 19 or over 0 0 0 0 0 3,400 5,020 4,930 4,830 4,740 4,640 27,560

104 Deductibility of charitable contributions (education) 6,840 7,270 7,730 8,170 8,600 10,260 13,220 13,820 14,480 14,720 14,970 113,240

105 Exclusion of employer-provided educational assistance 1,390 1,510 1,630 1,740 1,860 1,650 1,570 1,650 1,730 1,810 1,900 17,050

106 Special deduction for teacher expenses 170 180 170 170 180 190 210 210 210 210 220 1,950

107 Discharge of student loan indebtedness 90 90 100 110 120 150 170 190 210 240 260 1,640

108 Qualified school construction bonds 8/ 540 520 490 470 440 410 390 360 330 320 300 4,030

Training, employment, and social services: 

109 Work opportunity tax credit 1,690 1,780 1,830 1,890 1,950 1,300 530 370 280 200 160 10,290

110 Employer provided child care exclusion 420 530 640 680 730 970 1,100 1,170 1,240 1,320 1,390 9,770

111 Employer-provided child care credit 20 20 20 20 20 20 20 30 30 30 40 250

112 Assistance for adopted foster children 660 700 750 800 850 900 960 1,020 1,080 1,150 1,220 9,430

113 Adoption credit and exclusion 790 830 860 880 900 910 920 930 940 950 950 9,070

114 Exclusion of employee meals and lodging (other than military) 5,620 7,760 8,120 8,050 8,270 9,560 10,300 10,570 10,870 11,210 11,560 96,270

115 Credit for child and dependent care expenses 9/ 3,860 5,230 3,480 3,540 3,610 3,730 3,870 3,950 4,040 4,120 4,210 39,780

116 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

117 Deductibility of charitable contributions, other than education and health 52,140 55,500 58,860 62,250 65,550 79,070 103,560 108,430 113,540 118,890 124,490 890,140

118 Exclusion of certain foster care payments 510 510 520 530 540 540 540 540 560 580 590 5,450

119 Exclusion of parsonage allowances 950 1,000 1,050 1,110 1,170 1,230 1,300 1,370 1,440 1,510 1,590 12,770

120 Indian employment credit 70 50 30 30 30 20 20 20 10 10 10 230

121 Credit for employer differential wage payments 0 0 0 0 0 10 10 10 20 20 20 90

Health: 

122 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 221,460 221,020 225,140 235,300 248,460 289,890 320,580 337,950 356,210 375,490 395,820 3,005,860

123 Self-employed medical insurance premiums 7,690 8,010 8,530 9,080 9,650 11,070 12,180 12,870 13,580 14,300 15,120 114,390

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from corporations and individuals
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

124 Medical Savings Accounts / Health Savings Accounts 10,760 10,890 11,150 11,610 12,220 13,900 14,960 15,490 16,050 16,540 17,020 139,830

125 Deductibility of medical expenses 8,350 8,820 9,390 10,100 10,980 16,760 20,830 22,660 24,600 26,700 28,940 179,780

126 Exclusion of interest on hospital construction bonds 3,510 3,530 3,430 3,520 3,540 3,840 3,970 4,040 4,380 4,170 4,320 38,740

127 Refundable Premium Assistance Tax Credit 11/ 6,360 5,160 3,690 3,990 4,270 4,980 5,450 5,910 6,310 6,670 7,090 53,520

128 Credit for employee health insurance expenses of small business 40 30 10 10 0 0 0 0 0 0 0 50

129 Deductibility of charitable contributions (health) 9,970 10,570 11,170 11,770 12,350 14,090 17,030 17,820 18,620 19,470 20,330 153,220

130 Tax credit for orphan drug research 1,900 2,290 2,750 3,310 3,990 4,800 5,770 6,940 8,360 10,060 12,110 60,380

131 Special Blue Cross/Blue Shield tax benefits 230 300 330 350 360 380 400 430 460 490 530 4,030

132 Distributions from retirement plans for premiums for health and long-term care insurance 450 460 470 490 500 590 630 650 660 670 670 5,790

133 Credit for family and sick leave taken by self-employed individuals 13/ 1,180 180 0 0 0 0 0 0 0 0 0 180

Income security: 

134 Child credit 14/ 72,570 65,240 76,880 77,010 77,470 48,710 20,580 20,330 20,100 19,880 19,660 445,860

135 Exclusion of railroad retirement (Social Security equivalent) benefits 300 280 250 230 210 200 190 170 140 110 80 1,860

136 Exclusion of workers' compensation benefits 9,010 9,020 9,030 9,040 9,040 9,050 9,060 9,070 9,080 9,080 9,090 90,560

137 Exclusion of public assistance benefits (normal tax method) 600 600 630 630 640 680 700 730 740 730 770 6,850

138 Exclusion of special benefits for disabled coal miners 20 20 20 20 20 20 10 10 10 10 10 150

139 Exclusion of military disability pensions 170 170 170 170 180 200 210 210 220 220 230 1,980

Net exclusion of pension contributions and earnings: 

140 Defined benefit employer plans 70,340 73,370 74,750 77,170 78,490 86,410 86,680 87,300 84,610 81,640 77,550 807,970

141 Defined contribution employer plans 100,020 102,850 109,150 111,860 117,110 138,380 142,790 148,130 154,690 161,090 167,690 1,353,740

142 Individual Retirement Accounts 20,770 19,890 21,460 22,630 23,660 28,840 30,570 32,170 34,010 36,300 38,780 288,310

143 Low and moderate income savers credit 1,220 1,260 1,300 1,270 1,270 1,440 1,410 1,400 1,400 1,390 1,400 13,540

144 Self-Employed plans 32,260 33,170 35,210 36,080 37,780 44,640 46,060 47,780 49,900 51,960 54,090 436,670

Exclusion of other employee benefits: 

145 Premiums on group term life insurance 3,190 3,250 3,330 3,450 3,580 4,060 4,310 4,450 4,590 4,740 4,900 40,660

146 Premiums on accident and disability insurance 340 340 340 350 350 350 350 350 350 350 350 3,480

147 Income of trusts to finance supplementary unemployment benefits 20 10 20 20 30 30 30 40 40 40 40 300

148 Income of trusts to finance voluntary employee benefits associations 1,130 1,190 1,260 1,330 1,420 1,580 1,640 1,720 1,810 1,900 1,990 15,840

149 Special ESOP rules 210 220 220 230 230 240 240 250 250 270 270 2,420

150 Additional deduction for the blind 40 40 40 40 50 50 50 50 50 60 60 490

151 Additional deduction for the elderly 5,900 6,020 6,520 6,940 7,490 6,450 6,960 7,500 7,820 8,370 8,940 73,010

152 Deductibility of casualty losses 0 0 0 0 0 650 1,010 1,030 1,070 110 1,140 5,010

153 Earned income tax credit 15/ 2,080 2,410 2,780 2,970 3,060 3,130 4,590 4,730 4,870 5,040 5,200 38,780

154 Recovery rebate credits 16/ 20,480 1,280 20 0 0 0 0 0 0 0 0 1,300

155 Exemption of unemployment insurance benefits 26,480 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 

156 Social Security benefits for retired and disabled workers and spouses, dependents and sur 26,630 27,240 27,570 29,330 29,890 33,300 38,390 40,090 41,900 43,740 45,510 356,960

157 Credit for certain employer contributions to social security 1,040 1,410 1,560 1,670 1,780 1,890 1,990 2,100 2,210 2,320 2,420 19,350

Veterans benefits and services: 

158 Exclusion of veterans death benefits and disability compensation 9,770 11,010 11,380 11,720 12,160 13,180 14,950 15,580 16,230 16,890 17,590 140,690

159 Exclusion of veterans pensions 220 230 220 210 210 220 250 250 250 250 250 2,340

160 Exclusion of GI bill benefits 1,470 1,510 1,470 1,500 1,550 1,670 1,880 1,950 2,020 2,090 2,170 17,810

161 Exclusion of interest on veterans housing bonds 80 90 90 80 90 90 100 100 110 110 100 960

General purpose fiscal assistance: 

162 Exclusion of interest on public purpose State and local bonds 31,240 31,520 30,520 31,360 31,580 34,230 35,380 35,950 38,990 37,130 38,540 345,200

163 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

164 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 17/ 7,170 7,670 7,710 7,880 8,240 86,240 120,500 121,690 127,380 133,560 140,090 760,960

Interest: 

165 Deferral of interest on U.S. savings bonds 840 830 820 810 800 800 790 780 770 760 750 7,910

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 6,740 7,030 7,070 7,290 7,700 39,370 57,270 60,230 63,060 66,110 69,310 384,440

7,170 7,670 7,710 7,880 8,240 86,240 120,500 121,690 127,380 133,560 140,090 760,960

Exclusion of interest on State and local bonds for: 

Public purposes 31,240 31,520 30,520 31,360 31,580 34,230 35,380 35,950 38,990 37,130 38,540 345,200

Energy facilities 10 10 10 10 10 10 10 10 10 10 10 100

350 360 350 360 360 390 400 400 430 420 430 3,900

Small-issues 100 100 90 90 90 110 110 110 120 120 120 1,060

Owner-occupied mortgage subsidies 910 920 890 920 920 1,000 1,040 1,050 1,140 1,090 1,130 10,100

Rental housing 1,540 1,560 1,510 1,550 1,560 1,690 1,750 1,780 1,930 1,830 1,910 17,070

Airports, docks, and similar facilities 920 930 900 930 930 1,010 1,040 1,060 1,150 1,100 1,140 10,190

Student loans 180 180 180 180 180 200 200 210 220 220 220 1,990

Private nonprofit educational facilities 2,450 2,470 2,400 2,460 2,480 2,690 2,780 2,820 3,070 2,920 3,030 27,120

Hospital construction 3,510 3,530 3,430 3,520 3,540 3,840 3,970 4,040 4,380 4,170 4,320 38,740

Veterans' housing 80 90 90 80 90 90 100 100 110 110 100 960

1/ The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2021 $1,020; 2022 $330 and $0 thereafter.

2/ In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2021 $3,610; 2022 $3,260; 2023 $1,360 and $0 thereafter.

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from corporations and individuals

Nonbusiness State and local taxes other than on owner-occupied homes 

Water, sewage, and hazardous waste disposal facilities 
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

3/ In addition, the credit for holding clean renewable energy bonds has outlay effects of (in millions of dollars):

2021 $60; 2022 $40; 2023 $40; 2024 $40; 2025 $40; 2026, $40; 2027 $40; 2028 $40; 2029 $40, 2030 $40, and 3031 $40.

4/ In addition, the qualified energy conservation bonds have outlay effects of (in millions of dollars):

2021 $40; 2022 $40; 2023 $40; 2024 $43; 2025 $30; 2026, $30; 2027 $30; 2028 $30; 2029 $30, 2030 $30, and 2031 $30.

5/ In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows:

 2021 $110; 2022 $120; 2023 $120; 2024 $110; 2025 $110; 2026, $110; 2027 $110; 2028 $110; 2029 $110, 2030 $100, and 2031 $100.

6/ In addition, the tax credits and deductions for postsecondary education expenses have outlay effects of

2021 $3,940; 2022 $2,980; 2023 $2,980; 2024 $2,960; 2025 $2,930; 2026 $2,890; 2027 $2,850; 2028 $2,810; 2029 $2,770; 2030 $2,730; and 2031 $2,680

7/ In addition, the credit for holders of zone academy bonds has outlay effects of (in millions of dollars):

2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025 $40; 2026 $40; 2027 $40; 2028 $40; 2029 $40, 2030 $40, and 2031 $40.

8/ In addition, the provision for school construction bonds has outlay effects of (in millions of dollars):

2021 $800; 2022 $560; 2023 $560; 2024 $560; 2025 $550; 2026 $550; 2027 $550; 2028 $540; 2029 $540, 2030 $540, and 2031 $530.

9/ In addition, the credit is refundable for one year with outlay effects (millions of dollars): 2022 $7,960.

10/ In addition, the employer contributions for health have effects on payroll tax receipts (in millions of dollars) as follows: 2021 $128,380; 2022 $136,900; 2023 $143,900; 

11/ In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows:

2021 $60,150; 2022 $47,790; 2023 $32,740; 2024 $30,680; 2025 $31,460; 2026 $32,090; 2027 $32,950; 2028 $35,920; 2029 $38,620; 2030 $40,680; and 2031 $42,570. 

12/ In addition, the effect of the health coverage tax credit on receipts has outlay effects of (in millions of dollars)

$20 in 2021 and $0 thereafter.

13/ In addition, the effect of the child tax credit on receipts has outlay effects of (in millions of dollars):

2021 $43,100; 2022 $111,650; 2023 $36,120; 2024 $35,970; 2025 $35,790; 2026 $36,230; 2027 $23,000; 2028 $22,760; 2029 $22,610; 2030 $22,490; and 2031 $22,420.

The child tax credit line also includes the credit for other dependents (in millions of dollars): 

2021 $9,071; 2022 $10,242; 2023 $10,273; 2024 $10,271; 2025 $10,388; 2026 $5.920; 2027 $0; 2028 $0; 2029 $0; 2030 0; and 2031 0.

14/ In addition, the earned income tax credit on receipts has outlay effects of (in millions of dollars):

2021 $68,870; 2022 $77,290; 2023 $64,440; 2024 $67,330; 2025 $68,650; 2026 $69,260; 2027 $68,940; 2028 $69,610; 2029 $70,440; 2030 $71,480; and 2031 $72,710.

15/ In addition, the recovery rebate credits have outlay effects of (in millions of dollars):

2021 $274,654; 2022 $2,528; 2023 $43; and $0 thereafter.

16/ In addition, the Build America Bonds have outlay effects of (in millions of dollars):

2021 $2,910; 2022 $2,500; 2023 $2,470; 2024 $2,440; 2025 $2,420; 2026 $2,390; 2027 $2,360; 2028 $2,340; 2029 $2,310, 2030 $2,280, and 2031 $2,250.

17/ Because of interactions with the $10,000 cap on state and local tax deductions for the years 2018 through 2025, these estimates understate the combined effects 

of repealing deductions for both property taxes on owner occupied housing and other non-business taxes. The estimate of repealing both is (in millions of dollars):

2021 $20,170; 2022 $20,790; 2023 $21,590; 2024 $22,563; 2025 $23,640; 2026 $114,960; 2027 $158,470; 2028 $162,300; 2029 $169,870; 2030 $178,000; and 2031 $186,600.

2024 $150,450; 2025 $158,470; 2026 $167,310; 2027 $175,910; 2028 $184,750; 2029 $194,090; 2030 $203,930; and 2031 $214,210; 
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 0 0 0 0 0 0 0 0 0 0 0 0

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 0 0 0 0 0 0 0 0 0 0 0 0

3 Exclusion of certain allowances for Federal employees abroad 0 0 0 0 0 0 0 0 0 0 0 0

4 Reduced tax rate on active income of controlled foreign corporations 19,310 33,580 36,100 38,610 40,890 36,500 33,980 35,040 35,750 36,580 37,470 364,500

5 Deduction for foreign-derived intangible income dervied from trade or 6,840 11,900 12,790 13,680 14,490 9,130 9,590 9,890 10,090 10,320 10,580 112,460

6 Interest Charge Domestic International Sales Corporations (IC-DISCs 0 0 0 0 0 0 0 0 0 0 0 0

0

General science, space, and technology: 0

7 Expensing of research and experimentation expenditures (normal tax 5,530 -20,660 -33,210 -23,890 -14,400 -4,250 0 0 0 0 0 -96,410

8 Credit for increasing research activities 16,560 18,240 19,690 21,020 22,310 23,600 24,900 26,220 27,580 28,990 30,450 243,000

Energy: 

9 Expensing of exploration and development costs, fuels -10 20 50 80 90 90 90 90 90 90 90 780

10 Excess of percentage over cost depletion, fuels 360 420 460 480 500 530 560 600 630 670 700 5,550

11 Exception from passive loss limitation for working interests in oil and 0 0 0 0 0 0 0 0 0 0 0 0

12 Capital gains treatment of royalties on coal 0 0 0 0 0 0 0 0 0 0 0 0

13 Exclusion of interest on energy facility bonds 0 0 0 0 0 0 0 0 0 0 0 0

14 Enhanced oil recovery credit 480 380 350 560 760 940 1,130 1,270 1,330 1,370 1,410 9,500

15 Energy production credit 1/ 4,760 4,700 4,960 5,310 5,550 5,320 5,160 4,870 4,520 3,960 3,290 47,640

16 Marginal wells credit 210 230 190 200 250 310 350 370 380 390 400 3,070

17 Energy investment credit 1/ 5,840 6,620 6,430 6,980 7,120 6,570 6,480 5,230 4,210 3,020 2,380 55,040

18 Alcohol fuel credits 2/ 0 0 0 0 0 0 0 0 0 0 0 0

19 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 20 20 10 0 0 0 0 0 0 0 0 30

20 Tax credits for clean-fuel burning vehicles and refueling property 150 170 150 130 130 110 90 80 70 70 70 1,070

21 Exclusion of utility conservation subsidies 0 0 0 0 0 0 0 0 0 0 0 0

22 Credit for holding clean renewable energy bonds 4/ 20 20 20 20 20 20 20 20 20 20 20 200

23 Credit for investment in clean coal facilities 0 0 10 20 40 40 40 30 30 20 20 250

24 Amortize all geological and geophysical expenditures over 2 years 40 40 40 50 50 50 50 50 40 40 40 450

25 Allowance of deduction for certain energy efficient commercial buildin 40 20 20 20 20 20 20 20 20 20 20 200

26 Credit for construction of new energy efficient homes 230 160 160 150 160 170 110 40 10 0 0 960

27 Credit for energy efficiency improvements to existing homes 0 0 0 0 0 0 0 0 0 0 0 0

28 Credit for residential energy efficient property 0 0 0 0 0 0 0 0 0 0 0 0

29 Qualified energy conservation bonds 5/ 10 10 10 10 10 10 10 10 10 10 10 100

30 Advanced Energy Property Credit 10 10 10 10 10 10 10 10 10 10 0 90

31 Advanced nuclear power production credit 0 30 140 210 240 270 280 280 280 230 100 2,060

32 Reduced tax rate for nuclear decommissioning funds 110 110 120 120 130 130 140 150 150 160 170 1,380

Natural resources and environment: 

33 Expensing of exploration and development costs, nonfuel minerals 0 0 0 0 10 10 10 10 10 10 10 70

34 Excess of percentage over cost depletion, nonfuel minerals 60 70 80 80 90 90 100 110 110 120 120 970

35 Exclusion of interest on bonds for water, sewage, and hazardous wa 60 50 40 50 50 60 70 70 80 70 90 630

36 Capital gains treatment of certain timber income 0 0 0 0 0 0 0 0 0 0 0 0

37 Expensing of multiperiod timber growing costs 100 100 100 110 110 110 110 120 120 120 130 1,130

38 Tax incentives for preservation of historic structures 480 460 540 650 730 780 810 820 830 840 850 7,310

39 Carbon oxide sequestration credit 460 580 720 820 1,020 1,310 2,180 2,970 3,250 3,570 3,710 20,130

40 Deduction for endangered species recovery expenditures 10 10 10 10 10 10 20 20 20 20 20 150

Agriculture: 

41 Expensing of certain capital outlays 0 10 10 10 10 10 10 10 10 10 10 100

42 Expensing of certain multiperiod production costs 10 10 10 10 10 10 20 20 20 20 20 150

43 Treatment of loans forgiven for solvent farmers 0 0 0 0 0 0 0 0 0 0 0 0

44 Capital gains treatment of certain agriculture income 0 0 0 0 0 0 0 0 0 0 0 0

45 Income averaging for farmers 0 0 0 0 0 0 0 0 0 0 0 0

46 Deferral of gain on sale of farm refiners 0 0 0 0 0 0 0 0 0 0 0 0

47 Expensing of reforestation expenditures 10 10 10 10 10 10 10 10 10 10 10 100

Commerce and housing: 

Financial institutions and insurance: 

48 Exemption of credit union income 2,080 2,120 2,170 2,350 2,410 2,450 2,650 2,740 2,790 2,830 2,820 25,330

49 Exclusion of life insurance death benefits 1,210 1,290 1,340 1,370 1,400 1,420 1,450 1,480 1,510 1,540 1,580 14,380

50 Exemption or special alternative tax for small property and casualty 1,050 1,170 1,210 1,240 1,270 1,300 1,350 1,380 1,410 1,470 1,510 13,310

51 Tax exemption of insurance income earned by tax-exempt organiza 330 350 360 370 370 380 390 390 400 410 420 3,840

52 Exclusion of interest spread of financial institutions 0 0 0 0 0 0 0 0 0 0 0 0

Housing: 

53 Exclusion of interest on owner-occupied mortgage subsidy bonds 150 120 90 120 120 150 170 180 220 180 240 1,590

54 Exclusion of interest on rental housing bonds 250 200 160 200 210 250 290 300 370 300 410 2,690

55 Deductibility of mortgage interest on owner-occupied homes 0 0 0 0 0 0 0 0 0 0 0 0

56 Deductibility of State and local property tax on owner-occupied hom 0 0 0 0 0 0 0 0 0 0 0 0

57 Deferral of income from installment sales 0 0 0 0 0 0 0 0 0 0 0 0

58 Capital gains exclusion on home sales 0 0 0 0 0 0 0 0 0 0 0 0

59 Exclusion of net imputed rental income 0 0 0 0 0 0 0 0 0 0 0 0

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from corporations
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

60 Exception from passive loss rules for $25,000 of rental loss 0 0 0 0 0 0 0 0 0 0 0 0

61 Credit for low-income housing investments 8,430 10,720 10,020 9,860 9,820 9,890 10,150 10,420 10,690 10,970 11,260 103,800

62 Accelerated depreciation on rental housing (normal tax method) 60 60 60 70 80 90 90 100 100 100 110 860

63 Discharge of mortgage indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

64 Premiums for mortgage insurance deductible as interest 0 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

65 Discharge of business indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

66 Exceptions from imputed interest rules 0 0 0 0 0 0 0 0 0 0 0 0

67 Treatment of qualified dividends 0 0 0 0 0 0 0 0 0 0 0 0

68 Capital gains (except agriculture, timber, iron ore, and coal) 0 0 0 0 0 0 0 0 0 0 0 0

69 Capital gains exclusion of small corporation stock 0 0 0 0 0 0 0 0 0 0 0 0

70 Step-up basis of capital gains at death 0 0 0 0 0 0 0 0 0 0 0 0

71 Carryover basis of capital gains on gifts 0 0 0 0 0 0 0 0 0 0 0 0

72 Ordinary income treatment of loss from small business corporation 0 0 0 0 0 0 0 0 0 0 0 0

73 Deferral of gains from like-kind exchanges 1,230 1,290 1,350 1,420 1,490 1,560 1,630 1,720 1,800 1,890 1,990 16,140

74 Depreciation of buildings other than rental housing (normal tax meth 720 610 370 350 370 340 300 320 370 420 460 3,910

75 Accelerated depreciation of machinery and equipment (normal tax m 14,350 10,190 4,490 -2,330 -9,310 -14,580 -18,840 -14,780 -8,300 -4,290 -1,810 -59,560

76 Expensing of certain small investments (normal tax method) -10 30 120 370 630 800 950 840 640 520 450 5,350

77 Exclusion of interest on small issue bonds 20 10 10 10 10 20 20 20 20 20 30 170

78 Special rules for certain film and TV production -30 0 60 110 150 -230 -310 -150 -70 -30 -10 -480

79 Allow 20-percent deduction to certain pass-through income 0 0 0 0 0 0 0 0 0 0 0 0

Transportation: 

80 Tonnage tax 100 110 110 110 120 120 120 130 130 140 140 1,230

81 Deferral of tax on shipping companies 10 10 10 10 10 10 10 10 10 10 10 100

82 Exclusion of reimbursed employee parking expenses -1,040 -1,240 -1,420 -1,480 -1,550 -1,620 -1,690 -1,770 -1,850 -1,890 -1,920 -16,430

83 Exclusion for employer-provided transit passes -350 -430 -500 -530 -570 -610 -660 -700 -750 -770 -780 -6,300

84 Tax credit for certain expenditures for maintaining railroad tracks 110 110 80 50 40 30 20 20 10 10 10 380

85 Exclusion of interest on bonds for Highway Projects and rail-truck tra 130 130 120 120 110 100 100 90 80 80 70 1,000

Community and regional development: 

86 Exclusion of interest for airport, dock, and similar bonds 150 120 90 120 120 150 170 180 220 180 240 1,590

87 Exemption of certain mutuals' and cooperatives' income 90 100 100 100 100 110 110 110 110 120 120 1,080

88 Empowerment zones 80 70 70 80 80 60 40 30 20 20 20 490

89 New markets tax credit 1,120 1,150 1,190 1,230 1,280 1,330 1,310 1,200 1,040 850 630 11,210

90 Credit to holders of Gulf Tax Credit Bonds. 20 10 10 10 10 10 10 10 10 10 10 100

91 Recovery Zone Bonds 6/ 20 10 10 10 10 10 10 10 10 10 10 100

92 Tribal Economic Development Bonds 0 0 0 0 0 0 0 0 0 0 0 0

93 Opportunity Zones 630 530 390 380 380 -1,820 -1,260 110 150 180 210 -750

94 Employee retention credit 130 130 70 50 50 40 30 30 20 20 20 460

Education, training, employment, and social services: 

Education: 

95 Exclusion of scholarship and fellowship income (normal tax method 0 0 0 0 0 0 0 0 0 0 0 0

96 Tax credits and deductions for postsecondary education expenses 0 0 0 0 0 0 0 0 0 0 0 0

97 Deductibility of student-loan interest 0 0 0 0 0 0 0 0 0 0 0 0

98 Qualified tuition programs (includes Education IRA) 0 0 0 0 0 0 0 0 0 0 0 0

99 Exclusion of interest on student-loan bonds 30 20 20 20 20 30 30 40 40 40 50 310

100 Exclusion of interest on bonds for private nonprofit educational facil 400 320 250 320 330 400 460 480 590 480 650 4,280

101 Credit for holders of zone academy bonds 8/ 110 100 90 80 60 50 50 40 40 30 30 570

102 Exclusion of interest on savings bonds redeemed to finance educat 0 0 0 0 0 0 0 0 0 0 0 0

103 Parental personal exemption for students age 19 or over 0 0 0 0 0 0 0 0 0 0 0 0

104 Deductibility of charitable contributions (education) 780 830 870 920 960 1,010 1,040 1,080 1,120 1,170 1,230 10,230

105 Exclusion of employer-provided educational assistance 0 0 0 0 0 0 0 0 0 0 0 0

106 Special deduction for teacher expenses 0 0 0 0 0 0 0 0 0 0 0 0

107 Discharge of student loan indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

108 Qualified school construction bonds 9/ 130 130 120 120 110 100 100 90 80 80 70 1,000

Training, employment, and social services: 

109 Work opportunity tax credit 1,280 1,340 1,380 1,430 1,470 920 410 290 220 160 130 7,750

110 Employer provided child care exclusion 0 0 0 0 0 0 0 0 0 0 0 0

111 Employer-provided child care credit 20 20 20 20 20 20 20 30 30 30 30 240

112 Assistance for adopted foster children 0 0 0 0 0 0 0 0 0 0 0 0

113 Adoption credit and exclusion 0 0 0 0 0 0 0 0 0 0 0 0

114 Exclusion of employee meals and lodging (other than military) -210 -140 -560 -840 -880 -910 -950 -980 -1,020 -1,060 -1,100 -8,440

115 Credit for child and dependent care expenses 0 0 0 0 0 0 0 0 0 0 0 0

116 Credit for disabled access expenditures 0 0 0 0 0 0 0 0 0 0 0 0

117 Deductibility of charitable contributions, other than education and he 1,330 1,390 1,440 1,490 1,550 1,630 1,690 1,750 1,820 1,890 1,960 16,610

118 Exclusion of certain foster care payments 0 0 0 0 0 0 0 0 0 0 0 0

119 Exclusion of parsonage allowances 0 0 0 0 0 0 0 0 0 0 0 0

120 Indian employment credit 40 30 10 10 10 10 10 10 0 0 0 90

121 Credit for employer differential wage payments 0 0 0 0 0 10 10 10 10 10 10 60

Health: 

122 Exclusion of employer contributions for medical insurance premiums a 0 0 0 0 0 0 0 0 0 0 0 0

123 Self-employed medical insurance premiums 0 0 0 0 0 0 0 0 0 0 0 0

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from corporations
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

124 Medical Savings Accounts / Health Savings Accounts 0 0 0 0 0 0 0 0 0 0 0 0

125 Deductibility of medical expenses 0 0 0 0 0 0 0 0 0 0 0 0

126 Exclusion of interest on hospital construction bonds 580 460 360 460 470 570 650 690 840 690 920 6,110

127 Refundable Premium Assistance Tax Credit 11/ 0 0 0 0 0 0 0 0 0 0 0 0

128 Credit for employee health insurance expenses of small business 12 10 10 0 0 0 0 0 0 0 0 0 10

129 Deductibility of charitable contributions (health) 4,320 4,550 4,770 5,000 5,230 5,460 5,690 5,940 6,180 6,440 6,690 55,950

130 Tax credit for orphan drug research 1,890 2,280 2,740 3,300 3,970 4,780 5,750 6,920 8,340 10,040 12,090 60,210

131 Special Blue Cross/Blue Shield tax benefits 230 300 330 350 360 380 400 430 460 490 530 4,030

132 Distributions from retirement plans for premiums for health and long-t 0 0 0 0 0 0 0 0 0 0 0 0

133 Credit for family and sick leave taken by self-employed individuals 14 0 0 0 0 0 0 0 0 0 0 0 0

Income security: 

134 Child credit 13/ 0 0 0 0 0 0 0 0 0 0 0 0

135 Exclusion of railroad retirement (Social Security equivalent) benefits 0 0 0 0 0 0 0 0 0 0 0 0

136 Exclusion of workers' compensation benefits 0 0 0 0 0 0 0 0 0 0 0 0

137 Exclusion of public assistance benefits (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

138 Exclusion of special benefits for disabled coal miners 0 0 0 0 0 0 0 0 0 0 0 0

139 Exclusion of military disability pensions 0 0 0 0 0 0 0 0 0 0 0 0

Net exclusion of pension contributions and earnings: 

140 Defined benefit employer plans 0 0 0 0 0 0 0 0 0 0 0 0

141 Defined contribution employer plans 0 0 0 0 0 0 0 0 0 0 0 0

142 Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

143 Low and moderate income savers credit 0 0 0 0 0 0 0 0 0 0 0 0

144 Self-Employed plans 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of other employee benefits: 

145 Premiums on group term life insurance 0 0 0 0 0 0 0 0 0 0 0 0

146 Premiums on accident and disability insurance 0 0 0 0 0 0 0 0 0 0 0 0

147 Income of trusts to finance supplementary unemployment benefits 0 0 0 0 0 0 0 0 0 0 0 0

148 Income of trusts to finance voluntary employee benefits associations 1,130 1,190 1,260 1,330 1,420 1,580 1,640 1,720 1,810 1,900 1,990 15,840

149 Special ESOP rules 180 190 190 200 200 210 210 220 220 230 230 2,100

150 Additional deduction for the blind 0 0 0 0 0 0 0 0 0 0 0 0

151 Additional deduction for the elderly 0 0 0 0 0 0 0 0 0 0 0 0

152 Deductibility of casualty losses 0 0 0 0 0 0 0 0 0 0 0 0

153 Earned income tax credit 14/ 0 0 0 0 0 0 0 0 0 0 0 0

154 Recovery rebate credits 15/ 0 0 0 0 0 0 0 0 0 0 0 0

155 Exemption of unemployment insurance benefits 0 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 0 0 0 0 0 0 0 0 0 0 0 0

156 Social Security benefits for retired and disabled workers and spous 0 0 0 0 0 0 0 0 0 0 0 0

157 Credit for certain employer contributions to social security 230 310 330 350 370 390 400 420 440 460 470 3,940

Veterans benefits and services: 

158 Exclusion of veterans death benefits and disability compensation 0 0 0 0 0 0 0 0 0 0 0 0

159 Exclusion of veterans pensions 0 0 0 0 0 0 0 0 0 0 0 0

160 Exclusion of GI bill benefits 0 0 0 0 0 0 0 0 0 0 0 0

161 Exclusion of interest on veterans housing bonds 10 10 10 10 10 10 20 20 20 20 20 150

General purpose fiscal assistance: 

162 Exclusion of interest on public purpose State and local bonds 5,140 4,110 3,160 4,080 4,210 5,060 5,820 6,110 7,450 6,120 8,220 54,340

163 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

164 Deductibility of nonbusiness State and local taxes other than on owne 0 0 0 0 0 0 0 0 0 0 0 0

Interest: 

165 Deferral of interest on U.S. savings bonds 0 0 0 0 0 0 0 0 0 0 0 0

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of interest on State and local bonds for: 0

Public purposes 5,140 4,110 3,160 4,080 4,210 5,060 5,820 6,110 7,450 6,120 8,220 54,340

Energy facilities 0 0 0 0 0 0 0 0 0 0 0 0

60 50 40 50 50 60 70 70 80 70 90 630

Small-issues 20 10 10 10 10 20 20 20 20 20 30 170

Owner-occupied mortgage subsidies 150 120 90 120 120 150 170 180 220 180 240 1,590

Rental housing 250 200 160 200 210 250 290 300 370 300 410 2,690

Airports, docks, and similar facilities 150 120 90 120 120 150 170 180 220 180 240 1,590

Student loans 30 20 20 20 20 30 30 40 40 40 50 310

Private nonprofit educational facilities 400 320 250 320 330 400 460 480 590 480 650 4,280

Hospital construction 580 460 360 460 470 570 650 690 840 690 920 6,110

Veterans' housing 10 10 10 10 10 10 20 20 20 20 20 150

See Table 1 footnotes for specific table information

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from corporations

Nonbusiness State and local taxes other than on owner-occupied 

homes 

Water, sewage, and hazardous waste disposal facilities 
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 13,940 14,500 15,050 15,630 14,390 14,540 15,060 15,720 16,430 17,200 18,020 156,540

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,470 6,790 7,130 7,490 7,860 8,260 8,670 9,100 9,560 10,040 10,540 85,440

3 Exclusion of certain allowances for Federal employees abroad 280 290 310 320 340 360 370 390 410 430 450 3,670

4 Reduced tax rate on active income of controlled foreign corporations (n 210 240 250 270 290 220 240 240 240 250 250 2,490

5 Deduction for foreign-derived intangible income dervied from trade or b 0 0 0 0 0 0 0 0 0 0 0 0

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 990 1,520 1,590 1,670 1,770 2,040 2,280 2,410 2,520 2,630 2,750 21,180

General science, space, and technology: 

7 Expensing of research and experimentation expenditures (normal tax m 890 -1,550 -6,450 -4,790 -3,070 -1,290 0 0 0 0 0 -17,150

8 Credit for increasing research activities 1,960 2,160 2,330 2,480 2,630 2,780 2,950 3,130 3,320 3,530 3,760 29,070

Energy: 

9 Expensing of exploration and development costs, fuels -40 70 170 270 300 330 350 360 370 370 350 2,940

10 Excess of percentage over cost depletion, fuels 260 300 330 350 370 410 450 490 520 540 570 4,330

11 Exception from passive loss limitation for working interests in oil and ga 20 20 20 20 20 20 20 20 20 20 20 200

12 Capital gains treatment of royalties on coal 70 50 50 50 50 60 60 60 70 70 70 590

13 Exclusion of interest on energy facility bonds 10 10 10 10 10 10 10 10 10 10 10 100

14 Enhanced oil recovery credit 30 20 20 30 40 50 60 70 70 80 80 520

15 Energy production credit 1/ 530 520 550 590 620 590 570 540 500 440 370 5,290

16 Marginal wells credit 40 40 30 30 40 60 60 70 70 70 70 540

17 Energy investment credit 1/ 520 590 580 630 650 600 590 470 370 250 210 4,940

18 Alcohol fuel credits 2/ 10 0 0 0 0 0 0 0 0 0 0 0

19 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 20 20 10 0 0 0 0 0 0 0 0 30

20 Tax credits for clean-fuel burning vehicles and refueling property 300 410 400 340 330 330 270 230 220 210 200 2,940

21 Exclusion of utility conservation subsidies 60 50 50 50 40 40 40 30 30 30 30 390

22 Credit for holding clean renewable energy bonds 4/ 50 50 50 50 50 50 50 50 50 50 50 500

23 Credit for investment in clean coal facilities 0 0 0 0 0 0 0 0 0 0 0 0

24 Amortize all geological and geophysical expenditures over 2 years 70 80 80 90 90 90 90 90 90 80 80 860

25 Allowance of deduction for certain energy efficient commercial building 170 120 100 100 100 110 110 110 110 110 110 1,080

26 Credit for construction of new energy efficient homes 140 120 100 100 100 100 60 20 10 0 0 610

27 Credit for energy efficiency improvements to existing homes 240 120 0 0 0 0 0 0 0 0 0 120

28 Credit for residential energy efficient property 2,590 2,200 1,640 480 140 0 0 0 0 0 0 4,460

29 Qualified energy conservation bonds 5/ 20 20 20 20 20 20 20 20 20 20 20 200

30 Advanced Energy Property Credit 0 0 0 0 0 0 0 0 0 0 0 0

31 Advanced nuclear power production credit 0 0 0 0 0 0 0 0 0 0 0 0

32 Reduced tax rate for nuclear decommissioning funds 0 0 0 0 0 0 0 0 0 0 0 0

Natural resources and environment: 

33 Expensing of exploration and development costs, nonfuel minerals 0 10 10 20 30 30 30 30 30 30 30 250

34 Excess of percentage over cost depletion, nonfuel minerals 50 50 60 60 60 70 80 90 90 100 100 760

35 Exclusion of interest on bonds for water, sewage, and hazardous waste 290 310 310 310 310 330 330 330 350 350 340 3,270

36 Capital gains treatment of certain timber income 140 140 150 150 160 170 190 200 210 220 230 1,820

37 Expensing of multiperiod timber growing costs 110 120 120 130 130 140 150 160 160 170 170 1,450

38 Tax incentives for preservation of historic structures 130 120 130 160 180 200 210 210 210 220 220 1,860

39 Carbon oxide sequestration credit 0 0 0 0 0 0 0 0 0 0 0 0

40 Deduction for endangered species recovery expenditures 20 20 20 30 30 30 40 40 40 50 50 350

Agriculture: 

41 Expensing of certain capital outlays 110 110 120 120 130 160 180 190 190 200 210 1,610

42 Expensing of certain multiperiod production costs 310 260 270 280 300 370 400 420 440 460 480 3,680

43 Treatment of loans forgiven for solvent farmers 50 60 60 60 60 70 70 70 70 70 70 660

44 Capital gains treatment of certain agriculture income 1,370 1,440 1,500 1,540 1,610 1,750 1,890 1,980 2,080 2,180 2,280 18,250

45 Income averaging for farmers 190 200 200 210 220 230 230 230 230 230 230 2,210

46 Deferral of gain on sale of farm refiners 20 20 20 20 20 20 20 20 20 20 20 200

47 Expensing of reforestation expenditures 40 50 50 50 60 60 70 70 70 70 70 620

Commerce and housing: 

Financial institutions and insurance: 

48 Exemption of credit union income 0 0 0 0 0 0 0 0 0 0 0 0

49 Exclusion of life insurance death benefits 10,760 11,620 12,060 12,760 13,530 14,470 15,400 15,660 16,190 16,640 17,010 145,340

50 Exemption or special alternative tax for small property and casualty in 0 0 0 0 0 0 0 0 0 0 0 0

51 Tax exemption of insurance income earned by tax-exempt organizatio 0 0 0 0 0 0 0 0 0 0 0 0

52 Exclusion of interest spread of financial institutions 3,110 2,030 2,100 2,170 2,260 2,400 2,530 2,600 2,690 2,780 2,860 24,420

Housing: 

53 Exclusion of interest on owner-occupied mortgage subsidy bonds 760 800 800 800 800 850 870 870 920 910 890 8,510

54 Exclusion of interest on rental housing bonds 1,290 1,360 1,350 1,350 1,350 1,440 1,460 1,480 1,560 1,530 1,500 14,380

55 Deductibility of mortgage interest on owner-occupied homes 29,370 30,340 31,340 33,530 36,770 79,990 105,190 111,260 117,100 123,350 129,490 798,360

56 Deductibility of State and local property tax on owner-occupied home 6,740 7,030 7,070 7,290 7,700 39,370 57,270 60,230 63,060 66,110 69,310 384,440

57 Deferral of income from installment sales 1,490 1,560 1,620 1,670 1,730 1,800 1,870 1,940 2,020 2,110 2,200 18,520

58 Capital gains exclusion on home sales 40,900 42,730 44,640 46,410 48,110 53,260 56,890 58,980 61,240 63,650 66,210 542,120

59 Exclusion of net imputed rental income 124,100 130,880 135,350 137,800 139,670 168,950 176,240 183,760 191,740 200,200 209,370 1,673,960

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from individuals
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

60 Exception from passive loss rules for $25,000 of rental loss 5,910 5,940 6,200 6,460 6,980 7,720 8,010 8,260 8,480 8,750 9,080 75,880

61 Credit for low-income housing investments 470 560 520 520 520 520 540 550 560 580 590 5,460

62 Accelerated depreciation on rental housing (normal tax method) 4,330 4,370 4,490 4,750 5,080 5,630 6,220 6,640 6,960 7,160 7,380 58,680

63 Discharge of mortgage indebtedness 250 270 280 290 310 80 0 0 0 0 0 1,230

64 Premiums for mortgage insurance deductible as interest 580 150 0 0 0 0 0 0 0 0 0 150

Commerce: 

65 Discharge of business indebtedness 30 40 20 20 10 30 30 30 30 40 40 290

66 Exceptions from imputed interest rules 20 30 40 50 50 60 70 70 80 80 80 610

67 Treatment of qualified dividends 31,650 33,120 34,660 35,880 37,560 40,660 43,600 45,580 47,870 50,100 52,400 421,430

68 Capital gains (except agriculture, timber, iron ore, and coal) 102,250 107,710 111,640 115,280 119,950 130,650 141,370 147,950 155,320 162,550 170,430 1,362,850

69 Capital gains exclusion of small corporation stock 1,520 1,620 1,740 1,830 1,900 1,970 2,040 2,110 2,200 2,290 2,390 20,090

70 Step-up basis of capital gains at death 41,850 43,910 46,060 48,480 51,420 53,990 58,580 62,250 66,070 70,270 74,830 575,860

71 Carryover basis of capital gains on gifts 3,400 4,290 4,360 4,610 4,650 5,240 5,890 5,700 5,590 5,590 5,670 51,590

72 Ordinary income treatment of loss from small business corporation st 70 70 70 80 80 80 80 90 90 90 90 820

73 Deferral of gains from like-kind exchanges 2,290 2,400 2,520 2,640 2,770 2,920 3,060 3,210 3,380 3,540 3,720 30,160

74 Depreciation of buildings other than rental housing (normal tax method 2,980 2,860 2,670 2,450 2,310 2,280 2,220 2,260 2,320 2,310 2,400 24,080

75 Accelerated depreciation of machinery and equipment (normal tax me 17,120 15,990 7,020 -220 -5,160 -10,850 -18,350 -14,470 -6,850 -2,420 420 -34,890

76 Expensing of certain small investments (normal tax method) -1,570 -790 3,350 6,610 8,770 11,540 14,450 13,490 11,400 10,320 9,820 88,960

77 Exclusion of interest on small issue bonds 80 90 80 80 80 90 90 90 100 100 90 890

78 Special rules for certain film and TV production -20 0 40 70 90 -160 -220 -110 -50 -20 -10 -370

79 Allow 20-percent deduction to certain pass-through income 33,780 56,070 56,700 59,150 63,030 25,910 0 0 0 0 0 260,860

Transportation: 

80 Tonnage tax 0 0 0 0 0 0 0 0 0 0 0 0

81 Deferral of tax on shipping companies 0 0 0 0 0 0 0 0 0 0 0 0

82 Exclusion of reimbursed employee parking expenses 2,510 2,990 3,510 3,610 3,760 3,940 4,120 4,310 4,520 4,740 4,970 40,470

83 Exclusion for employer-provided transit passes 640 790 940 1,000 1,060 1,140 1,220 1,320 1,410 1,510 1,630 12,020

84 Tax credit for certain expenditures for maintaining railroad tracks 60 60 50 30 20 10 10 10 10 0 0 200

85 Exclusion of interest on bonds for Highway Projects and rail-truck trans 120 120 110 110 100 100 90 90 90 80 80 970

Community and regional development: 

86 Exclusion of interest for airport, dock, and similar bonds 770 810 810 810 810 860 870 880 930 920 900 8,600

87 Exemption of certain mutuals' and cooperatives' income 0 0 0 0 0 0 0 0 0 0 0 0

88 Empowerment zones 50 20 30 30 30 30 20 10 0 0 0 170

89 New markets tax credit 20 20 20 20 30 30 30 30 20 20 10 230

90 Credit to holders of Gulf Tax Credit Bonds. 100 100 90 80 70 70 70 60 50 50 40 680

91 Recovery Zone Bonds 6/ 90 90 80 70 70 60 60 50 50 40 30 600

92 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 10 100

93 Opportunity Zones 2,360 2,960 1,710 1,800 1,690 -3,760 -9,960 480 630 810 910 -2,730

94 Employee retention credit 30 30 20 10 10 10 10 10 10 10 0 120

Education, training, employment, and social services: 

Education: 

95 Exclusion of scholarship and fellowship income (normal tax method) 3,790 4,140 4,280 4,520 4,800 5,370 6,230 6,590 6,980 7,380 7,800 58,090

96 Tax credits and deductions for postsecondary education expenses 7/ 9,250 14,620 14,380 14,320 14,180 14,070 14,130 13,900 13,670 13,430 13,200 139,900

97 Deductibility of student-loan interest 2,110 2,260 2,190 2,280 2,330 2,530 2,880 2,920 3,040 3,060 3,100 26,590

98 Qualified tuition programs (includes Education IRA) 2,790 2,970 3,200 3,570 4,060 4,980 5,980 7,090 8,550 10,500 13,070 63,970

99 Exclusion of interest on student-loan bonds 150 160 160 160 160 170 170 170 180 180 170 1,680

100 Exclusion of interest on bonds for private nonprofit educational facilitie 2,050 2,150 2,150 2,140 2,150 2,290 2,320 2,340 2,480 2,440 2,380 22,840

101 Credit for holders of zone academy bonds 8/ 180 170 160 150 140 130 130 120 120 110 110 1,340

102 Exclusion of interest on savings bonds redeemed to finance education 40 40 40 40 40 50 50 50 50 50 50 460

103 Parental personal exemption for students age 19 or over 0 0 0 0 0 3,400 5,020 4,930 4,830 4,740 4,640 27,560

104 Deductibility of charitable contributions (education) 6,060 6,440 6,860 7,250 7,640 9,250 12,180 12,740 13,360 13,550 13,740 103,010

105 Exclusion of employer-provided educational assistance 1,390 1,510 1,630 1,740 1,860 1,650 1,570 1,650 1,730 1,810 1,900 17,050

106 Special deduction for teacher expenses 170 180 170 170 180 190 210 210 210 210 220 1,950

107 Discharge of student loan indebtedness 90 90 100 110 120 150 170 190 210 240 260 1,640

108 Qualified school construction bonds 9/ 410 390 370 350 330 310 290 270 250 240 230 3,030

Training, employment, and social services: 

109 Work opportunity tax credit 410 440 450 460 480 380 120 80 60 40 30 2,540

110 Employer provided child care exclusion 420 530 640 680 730 970 1,100 1,170 1,240 1,320 1,390 9,770

111 Employer-provided child care credit 0 0 0 0 0 0 0 0 0 0 10 10

112 Assistance for adopted foster children 660 700 750 800 850 900 960 1,020 1,080 1,150 1,220 9,430

113 Adoption credit and exclusion 790 830 860 880 900 910 920 930 940 950 950 9,070

114 Exclusion of employee meals and lodging (other than military) 5,830 7,900 8,680 8,890 9,150 10,470 11,250 11,550 11,890 12,270 12,660 104,710

115 Credit for child and dependent care expenses 3,860 5,230 3,480 3,540 3,610 3,730 3,870 3,950 4,040 4,120 4,210 39,780

116 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

117 Deductibility of charitable contributions, other than education and hea 50,810 54,110 57,420 60,760 64,000 77,440 101,870 106,680 111,720 117,000 122,530 873,530

118 Exclusion of certain foster care payments 510 510 520 530 540 540 540 540 560 580 590 5,450

119 Exclusion of parsonage allowances 950 1,000 1,050 1,110 1,170 1,230 1,300 1,370 1,440 1,510 1,590 12,770

120 Indian employment credit 30 20 20 20 20 10 10 10 10 10 10 140

121 Credit for employer differential wage payments 0 0 0 0 0 0 0 0 10 10 10 30

Health: 

122 Exclusion of employer contributions for medical insurance premiums and 221,460 221,020 225,140 235,300 248,460 289,890 320,580 337,950 356,210 375,490 395,820 3,005,860

123 Self-employed medical insurance premiums 7,690 8,010 8,530 9,080 9,650 11,070 12,180 12,870 13,580 14,300 15,120 114,390

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from individuals
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2022-31

124 Medical Savings Accounts / Health Savings Accounts 10,760 10,890 11,150 11,610 12,220 13,900 14,960 15,490 16,050 16,540 17,020 139,830

125 Deductibility of medical expenses 8,350 8,820 9,390 10,100 10,980 16,760 20,830 22,660 24,600 26,700 28,940 179,780

126 Exclusion of interest on hospital construction bonds 2,930 3,070 3,070 3,060 3,070 3,270 3,320 3,350 3,540 3,480 3,400 32,630

127 Refundable Premium Assistance Tax Credit 11/ 6,360 5,160 3,690 3,990 4,270 4,980 5,450 5,910 6,310 6,670 7,090 53,520

128 Credit for employee health insurance expenses of small business 12/ 30 20 10 10 0 0 0 0 0 0 0 40

129 Deductibility of charitable contributions (health) 5,650 6,020 6,400 6,770 7,120 8,630 11,340 11,880 12,440 13,030 13,640 97,270

130 Tax credit for orphan drug research 10 10 10 10 20 20 20 20 20 20 20 170

131 Special Blue Cross/Blue Shield tax benefits 0 0 0 0 0 0 0 0 0 0 0 0

132 Distributions from retirement plans for premiums for health and long-ter 450 460 470 490 500 590 630 650 660 670 670 5,790

133 Credit for family and sick leave taken by self-employed individuals 14/ 1,180 180 0 0 0 0 0 0 0 0 0 180

Income security: 

134 Child credit 13/ 72,570 65,240 76,880 77,010 77,470 48,710 20,580 20,330 20,100 19,880 19,660 445,860

135 Exclusion of railroad retirement (Social Security equivalent) benefits 300 280 250 230 210 200 190 170 140 110 80 1,860

136 Exclusion of workers' compensation benefits 9,010 9,020 9,030 9,040 9,040 9,050 9,060 9,070 9,080 9,080 9,090 90,560

137 Exclusion of public assistance benefits (normal tax method) 600 600 630 630 640 680 700 730 740 730 770 6,850

138 Exclusion of special benefits for disabled coal miners 20 20 20 20 20 20 10 10 10 10 10 150

139 Exclusion of military disability pensions 170 170 170 170 180 200 210 210 220 220 230 1,980

Net exclusion of pension contributions and earnings: 

140 Defined benefit employer plans 70,340 73,370 74,750 77,170 78,490 86,410 86,680 87,300 84,610 81,640 77,550 807,970

141 Defined contribution employer plans 100,020 102,850 109,150 111,860 117,110 138,380 142,790 148,130 154,690 161,090 167,690 1,353,740

142 Individual Retirement Accounts 20,770 19,890 21,460 22,630 23,660 28,840 30,570 32,170 34,010 36,300 38,780 288,310

143 Low and moderate income savers credit 1,220 1,260 1,300 1,270 1,270 1,440 1,410 1,400 1,400 1,390 1,400 13,540

144 Self-Employed plans 32,260 33,170 35,210 36,080 37,780 44,640 46,060 47,780 49,900 51,960 54,090 436,670

Exclusion of other employee benefits: 

145 Premiums on group term life insurance 3,190 3,250 3,330 3,450 3,580 4,060 4,310 4,450 4,590 4,740 4,900 40,660

146 Premiums on accident and disability insurance 340 340 340 350 350 350 350 350 350 350 350 3,480

147 Income of trusts to finance supplementary unemployment benefits 20 10 20 20 30 30 30 40 40 40 40 300

148 Income of trusts to finance voluntary employee benefits associations 0 0 0 0 0 0 0 0 0 0 0 0

149 Special ESOP rules 30 30 30 30 30 30 30 30 30 40 40 320

150 Additional deduction for the blind 40 40 40 40 50 50 50 50 50 60 60 490

151 Additional deduction for the elderly 5,900 6,020 6,520 6,940 7,490 6,450 6,960 7,500 7,820 8,370 8,940 73,010

152 Deductibility of casualty losses 0 0 0 0 0 650 1,010 1,030 1,070 1,110 1,140 6,010

153 Earned income tax credit 14/ 2,080 2,410 2,780 2,970 3,060 3,130 4,590 4,730 4,870 5,040 5,200 38,780

154 Recovery rebate credits 15/ 20,480 1,280 20 0 0 0 0 0 0 0 0 1,300

155 Exemption of unemployment insurance benefits 26,480 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 

156 Social Security benefits for retired and disabled workers and spouses 26,630 27,240 27,570 29,330 29,890 33,300 38,390 40,090 41,900 43,740 45,510 356,960

157 Credit for certain employer contributions to social security 810 1,100 1,230 1,320 1,410 1,500 1,590 1,680 1,770 1,860 1,950 15,410

Veterans benefits and services: 

158 Exclusion of veterans death benefits and disability compensation 9,770 11,010 11,380 11,720 12,160 13,180 14,950 15,580 16,230 16,890 17,590 140,690

159 Exclusion of veterans pensions 220 230 220 210 210 220 250 250 250 250 250 2,340

160 Exclusion of GI bill benefits 1,470 1,510 1,470 1,500 1,550 1,670 1,880 1,950 2,020 2,090 2,170 17,810

161 Exclusion of interest on veterans housing bonds 70 80 80 70 80 80 80 80 90 90 80 810

General purpose fiscal assistance: 

162 Exclusion of interest on public purpose State and local bonds 26,100 27,410 27,360 27,280 27,370 29,170 29,560 29,840 31,540 31,010 30,320 290,860

163 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

164 Deductibility of nonbusiness State and local taxes other than on owner-o 7,170 7,670 7,710 7,880 8,240 86,240 120,500 121,690 127,380 133,560 140,090 760,960

Interest: 

165 Deferral of interest on U.S. savings bonds 840 830 820 810 800 800 790 780 770 760 750 7,910

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 6,740 7,030 7,070 7,290 7,700 39,370 57,270 60,230 63,060 66,110 69,310 384,440

7,170 7,670 7,710 7,880 8,240 86,240 120,500 121,690 127,380 133,560 140,090 760,960

Exclusion of interest on State and local bonds for: 

Public purposes 26,100 27,410 27,360 27,280 27,370 29,170 29,560 29,840 31,540 31,010 30,320 290,860

Energy facilities 10 10 10 10 10 10 10 10 10 10 10 100

290 310 310 310 310 330 330 330 350 350 340 3,270

Small-issues 80 90 80 80 80 90 90 90 100 100 90 890

Owner-occupied mortgage subsidies 760 800 800 800 800 850 870 870 920 910 890 8,510

Rental housing 1,290 1,360 1,350 1,350 1,350 1,440 1,460 1,480 1,560 1,530 1,500 14,380

Airports, docks, and similar facilities 770 810 810 810 810 860 870 880 930 920 900 8,600

Student loans 150 160 160 160 160 170 170 170 180 180 170 1,680

Private nonprofit educational facilities 2,050 2,150 2,150 2,140 2,150 2,290 2,320 2,340 2,480 2,440 2,380 22,840

Hospital construction 2,930 3,070 3,070 3,060 3,070 3,270 3,320 3,350 3,540 3,480 3,400 32,630

Veterans' housing 70 80 80 70 80 80 80 80 90 90 80 810

See Table 1 footnotes for specific table information

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2021-2031

(in millions of dollars)

Total from individuals

Nonbusiness State and local taxes other than on owner-occupied 

homes 

Water, sewage, and hazardous waste disposal facilities 
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

(in millions of dollars)

Provision 2021 2022 2022-31

122 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 221,460 221,020 3,005,860

59 Exclusion of net imputed rental income 124,100 130,880 1,673,960

68 Capital gains (except agriculture, timber, iron ore, and coal) 102,250 107,710 1,362,850

141 Defined contribution employer plans 100,020 102,850 1,353,740

117 Deductibility of charitable contributions, other than education and health 52,140 55,500 890,140

140 Defined benefit employer plans 70,340 73,370 807,970

55 Deductibility of mortgage interest on owner-occupied homes 29,370 30,340 798,360

164 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 17/ 7,170 7,670 760,960

70 Step-up basis of capital gains at death 41,850 43,910 575,860

58 Capital gains exclusion on home sales 40,900 42,730 542,120

134 Child credit 14/ 72,570 65,240 445,860

144 Self-Employed plans 32,260 33,170 436,670

67 Treatment of qualified dividends 31,650 33,120 421,430

56 Deductibility of State and local property tax on owner-occupied homes 17/ 6,740 7,030 384,440

4 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 19,520 33,810 366,970

156 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 26,630 27,240 356,960

162 Exclusion of interest on public purpose State and local bonds 31,240 31,520 345,200

142 Individual Retirement Accounts 20,770 19,890 288,310

8 Credit for increasing research activities 18,520 20,400 272,070

79 Allow 20-percent deduction to certain pass-through income 33,780 56,070 260,860

125 Deductibility of medical expenses 8,350 8,820 179,780

49 Exclusion of life insurance death benefits 11,970 12,910 159,720

1 Exclusion of benefits and allowances to armed forces personnel 13,940 14,500 156,540

129 Deductibility of charitable contributions (health) 9,970 10,570 153,220

158 Exclusion of veterans death benefits and disability compensation 9,770 11,010 140,690

96 Tax credits and deductions for postsecondary education expenses 6/ 9,250 14,620 139,900

124 Medical Savings Accounts / Health Savings Accounts 10,760 10,890 139,830

123 Self-employed medical insurance premiums 7,690 8,010 114,390

104 Deductibility of charitable contributions (education) 6,840 7,270 113,240

5 Deduction for foreign-derived intangible income dervied from trade or business within the United States 6,840 11,900 112,460

61 Credit for low-income housing investments 8,900 11,280 109,260

114 Exclusion of employee meals and lodging (other than military) 5,620 7,760 96,270

7 Expensing of research and experimentation expenditures (normal tax method) -1,580 -760 94,310

76 Expensing of certain small investments (normal tax method) -1,580 -760 94,310

136 Exclusion of workers' compensation benefits 9,010 9,020 90,560

2 Exclusion of income earned abroad by U.S. citizens 6,470 6,790 85,440

60 Exception from passive loss rules for $25,000 of rental loss 5,910 5,940 75,880

151 Additional deduction for the elderly 5,900 6,020 73,010

98 Qualified tuition programs (includes Education IRA) 2,790 2,970 63,970

130 Tax credit for orphan drug research 1,900 2,290 60,380

17 Energy investment credit 6,360 7,210 59,980

62 Accelerated depreciation on rental housing (normal tax method) 4,390 4,430 59,540

95 Exclusion of scholarship and fellowship income (normal tax method) 3,790 4,140 58,090

127 Refundable Premium Assistance Tax Credit 11/ 6,360 5,160 53,520

15 Energy production credit 5,290 5,220 52,930

71 Carryover basis of capital gains on gifts 3,400 4,290 51,590

73 Deferral of gains from like-kind exchanges 3,520 3,690 46,300

145 Premiums on group term life insurance 3,190 3,250 40,660

115 Credit for child and dependent care expenses 9/ 3,860 5,230 39,780

153 Earned income tax credit 15/ 2,080 2,410 38,780

126 Exclusion of interest on hospital construction bonds 3,510 3,530 38,740

74 Depreciation of buildings other than rental housing (normal tax method) 3,700 3,470 27,990

103 Parental personal exemption for students age 19 or over 0 0 27,560

100 Exclusion of interest on bonds for private nonprofit educational facilities 2,450 2,470 27,120

97 Deductibility of student-loan interest 2,110 2,260 26,590

48 Exemption of credit union income 2,080 2,120 25,330

52 Exclusion of interest spread of financial institutions 3,110 2,030 24,420

82 Exclusion of reimbursed employee parking expenses 1,460 1,740 24,060

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 990 1,520 21,180

39 Carbon oxide sequestration credit 460 580 20,130

69 Capital gains exclusion of small corporation stock 1,520 1,620 20,090

157 Credit for certain employer contributions to social security 1,040 1,410 19,350

57 Deferral of income from installment sales 1,490 1,560 18,520

44 Capital gains treatment of certain agriculture income 1,370 1,440 18,250

160 Exclusion of GI bill benefits 1,470 1,510 17,810

54 Exclusion of interest on rental housing bonds 1,540 1,560 17,070

FISCAL YEAR 2022-2031 PROJECTED REVENUE EFFECT

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

(in millions of dollars)

Provision 2021 2022 2022-31

105 Exclusion of employer-provided educational assistance 1,390 1,510 17,050

148 Income of trusts to finance voluntary employee benefits associations 1,130 1,190 15,840

143 Low and moderate income savers credit 1,220 1,260 13,540

50 Exemption or special alternative tax for small property and casualty insurance companies 1,050 1,170 13,310

119 Exclusion of parsonage allowances 950 1,000 12,770

89 New markets tax credit 1,140 1,170 11,440

109 Work opportunity tax credit 1,690 1,780 10,290

86 Exclusion of interest for airport, dock, and similar bonds 920 930 10,190

53 Exclusion of interest on owner-occupied mortgage subsidy bonds 910 920 10,100

14 Enhanced oil recovery credit 510 400 10,020

10 Excess of percentage over cost depletion, fuels 620 720 9,880

110 Employer provided child care exclusion 420 530 9,770

112 Assistance for adopted foster children 660 700 9,430

38 Tax incentives for preservation of historic structures 610 580 9,170

113 Adoption credit and exclusion 790 830 9,070

165 Deferral of interest on U.S. savings bonds 840 830 7,910

137 Exclusion of public assistance benefits (normal tax method) 600 600 6,850

152 Deductibility of casualty losses 0 0 6,010

132 Distributions from retirement plans for premiums for health and long-term care insurance 450 460 5,790

83 Exclusion for employer-provided transit passes 290 360 5,710

118 Exclusion of certain foster care payments 510 510 5,450

28 Credit for residential energy efficient property 2,590 2,200 4,460

108 Qualified school construction bonds 8/ 540 520 4,030

131 Special Blue Cross/Blue Shield tax benefits 230 300 4,030

20 Tax credits for clean-fuel burning vehicles and refueling property 450 580 4,010

35 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 350 360 3,900

51 Tax exemption of insurance income earned by tax-exempt organizations 330 350 3,840

42 Expensing of certain multiperiod production costs 320 270 3,830

9 Expensing of exploration and development costs, fuels -50 90 3,720

3 Exclusion of certain allowances for Federal employees abroad 280 290 3,670

16 Marginal wells credit 250 270 3,610

146 Premiums on accident and disability insurance 340 340 3,480

37 Expensing of multiperiod timber growing costs 210 220 2,580

149 Special ESOP rules 210 220 2,420

159 Exclusion of veterans pensions 220 230 2,340

45 Income averaging for farmers 190 200 2,210

31 Advanced nuclear power production credit 0 30 2,060

99 Exclusion of interest on student-loan bonds 180 180 1,990

139 Exclusion of military disability pensions 170 170 1,980

85 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 250 250 1,970

106 Special deduction for teacher expenses 170 180 1,950

101 Credit for holders of zone academy bonds 7/ 290 270 1,910

135 Exclusion of railroad retirement (Social Security equivalent) benefits 300 280 1,860

36 Capital gains treatment of certain timber income 140 140 1,820

34 Excess of percentage over cost depletion, nonfuel minerals 110 120 1,730

41 Expensing of certain capital outlays 110 120 1,710

107 Discharge of student loan indebtedness 90 90 1,640

26 Credit for construction of new energy efficient homes 370 280 1,570

32 Reduced tax rate for nuclear decommissioning funds 110 110 1,380

24 Amortize all geological and geophysical expenditures over 2 years 110 120 1,310

154 Recovery rebate credits 16/ 20,480 1,280 1,300

25 Allowance of deduction for certain energy efficient commercial building property 210 140 1,280

63 Discharge of mortgage indebtedness 250 270 1,230

80 Tonnage tax 100 110 1,230

87 Exemption of certain mutuals' and cooperatives' income 90 100 1,080

77 Exclusion of interest on small issue bonds 100 100 1,060

161 Exclusion of interest on veterans housing bonds 80 90 960

72 Ordinary income treatment of loss from small business corporation stock sale 70 70 820

90 Credit to holders of Gulf Tax Credit Bonds. 120 110 780

47 Expensing of reforestation expenditures 50 60 720

22 Credit for holding clean renewable energy bonds 3/ 70 70 700

91 Recovery Zone Bonds 5/ 110 100 700

43 Treatment of loans forgiven for solvent farmers 50 60 660

88 Empowerment zones 130 90 660

66 Exceptions from imputed interest rules 20 30 610

12 Capital gains treatment of royalties on coal 70 50 590

FISCAL YEAR 2022-2031 PROJECTED REVENUE EFFECT

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

(in millions of dollars)

Provision 2021 2022 2022-31

84 Tax credit for certain expenditures for maintaining railroad tracks 170 170 580

94 Employee retention credit 160 160 580

40 Deduction for endangered species recovery expenditures 30 30 500

150 Additional deduction for the blind 40 40 490

102 Exclusion of interest on savings bonds redeemed to finance educational expenses 40 40 460

21 Exclusion of utility conservation subsidies 60 50 390

33 Expensing of exploration and development costs, nonfuel minerals 0 10 320

29 Qualified energy conservation bonds 4/ 30 30 300

147 Income of trusts to finance supplementary unemployment benefits 20 10 300

65 Discharge of business indebtedness 30 40 290

23 Credit for investment in clean coal facilities 0 0 250

111 Employer-provided child care credit 20 20 250

120 Indian employment credit 70 50 230

11 Exception from passive loss limitation for working interests in oil and gas properties 20 20 200

46 Deferral of gain on sale of farm refiners 20 20 200

133 Credit for family and sick leave taken by self-employed individuals 13/ 1,180 180 180

64 Premiums for mortgage insurance deductible as interest 580 150 150

138 Exclusion of special benefits for disabled coal miners 20 20 150

27 Credit for energy efficiency improvements to existing homes 240 120 120

13 Exclusion of interest on energy facility bonds 10 10 100

81 Deferral of tax on shipping companies 10 10 100

92 Tribal Economic Development Bonds 10 10 100

116 Credit for disabled access expenditures 10 10 100

30 Advanced Energy Property Credit 10 10 90

121 Credit for employer differential wage payments 0 0 90

19 Bio-Diesel and small agri-biodiesel producer tax credits 2/ 40 40 60

128 Credit for employee health insurance expenses of small business 40 30 50

18 Alcohol fuel credits 1/ 10 0 0

163 Build America Bonds 16/ 0 0 0

78 Special rules for certain film and TV production -50 0 -850

93 Opportunity Zones 2,990 3,490 -3,480

75 Accelerated depreciation of machinery and equipment (normal tax method) 31,470 26,180 -94,450

See Table 1 footnotes for specific table information

FISCAL YEAR 2022-2031 PROJECTED REVENUE EFFECT

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021

2021

Provision Present Value

of Revenue Loss

7 Expensing of research and experimentation expenditures (normal tax method) 1,920

22 Credit for holding clean renewable energy bonds 0

9 Expensing of exploration and development costs - fuels 310

33 Expensing of exploration and development costs - nonfuels 30

37 Expensing of multiperiod timber growing costs 100

42 Expensing of certain multiperiod production costs - agriculture 170

41 Expensing of certain capital outlays - agriculture 90

47 Expensing of reforestation expenditures 30

62 Accelerated depreciation on rental housing -6,430

72 Depreciation of buildings other than rental -1,970

73 Accelerated depreciation of machinery and equipment -27,470

74 Expensing of certain small investments (normal tax method) 0

61 Credit for low-income housing investments 11,150

97 Qualified tuition programs 5,720

140 Defined benefit employer plans 48,060

141 Defined contribution employer plans 119,110

142 Exclusion of IRA contributions and earnings 2,910

142 Exclusion of Roth earnings and distributions 8,080

142 Exclusion of non-deductible IRA earnings 730

144 Exclusion of contributions and earnings for Self-Employed plans 7,670

162 Exclusion of interest on public-purpose bonds 11,700

Exclusion of interest on non-public purpose bonds 1/ 4,620

165 Deferral of interest on U.S. savings bonds 120

1/ Includes all components, other than public purpose, listed under ‘Exclusion of interest on State and local bonds’ in the Add 

Table 4. PRESENT VALUE OF SELECTED TAX EXPENDITURES

FOR ACTIVITY IN CALENDAR YEAR 2021

(in millions of dollars)
 U.S. Department of the Treasury

 Office of Tax Analysis

 December 9, 2021