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 2017–2027 using two 

methods of accounting: current revenue effects and present value effects. The present value approach provides estimates of the 

revenue 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 1, 2017 and 

reflect the economic assumptions from the Mid-Session Review of the 2017 Budget. In some cases, expired or repealed provisions are listed if their revenue effects occur in fiscal year 2017 or later. 

The total revenue effects for tax expenditures for fiscal years 2017–2027 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 revenue effects for these items are zero using the reference tax rules. The alternative baseline concepts are discussed in detail below.

Tables 2A and 2B report separately the respective portions of the total revenue 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 2018–2027 revenue 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 

revenues (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 of other tax provisions or Government programs. For example, if capital gains were 

taxed at ordinary rates, capital gain realizations would be expected to decline, resulting in lower tax receipts. Such behavioral 

effects are not reflected in the estimates.

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

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

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

be moved into higher tax brackets. Alternatively, repeal of an itemized deduction could lower the revenue 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 revenue 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 revenues 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. 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 revenue effects are presented in Table 4 for certain provisions that involve tax deferrals 

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

tables.

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

during calendar year 2017 which cause the deferrals or other long-term revenue effects. For instance, a pension contribution in 

2017 would cause a deferral of tax payments on wages in 2017 and on pension fund earnings on this contribution (e.g., interest) 

in later years. In some future year, however, the 2017 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 

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

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

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

Both the normal and reference tax baselines allow several major departures from a pure comprehensive income tax. For example, under the normal and reference tax baselines:

• 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 

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terest costs would be regarded as a positive tax expenditure (i.e., a tax subsidy).

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

Tax rates. The separate schedules applying to the various taxpaying units are included in the reference law baseline. Thus, 

corporate tax rates below the maximum statutory rate do not give rise to a tax expenditure. The normal tax baseline is similar, 

except that, by convention, it specifies the current maximum rate as the baseline for the corporate income tax. The lower tax

rates applied to the first $10 million of corporate income are thus regarded as a tax expenditure under the normal tax. By convention, the Alternative Minimum Tax is treated as part of the baseline rate structure under both the reference 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 rules, 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 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. 

Treatment of foreign income. Both the normal and reference tax baselines allow a tax credit for foreign income taxes paid (up to 

the amount of U.S. income taxes that would otherwise be due), which prevents double taxation of income earned abroad. Under the normal tax method, however, controlled foreign corporations (CFCs) are not regarded as entities separate from their 

controlling U.S. shareholders. Thus, the deferral of tax on income received by CFCs is regarded as a tax expenditure under this 

method. In contrast, except for tax haven activities, the reference law baseline follows current law in treating CFCs as separate 

taxable entities whose income is not subject to U.S. tax until distributed to U.S. taxpayers. Under this baseline, deferral of tax 

on CFC income is not a tax expenditure because U.S. taxpayers generally are not taxed on accrued, but unrealized, income.

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 1, 2017. 

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 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 

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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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. Inventory property sales source rules exception.—The United States generally taxes the worldwide income of U.S. persons 

and business entities. Under the baseline tax system, taxpayers receive a credit for foreign taxes paid which is limited to the precredit U.S. tax on the foreign source income. In contrast, the sales source rules for inventory property under current law allow 

U.S. exporters to use more foreign tax credits by allowing the exporters to attribute a larger portion of their earnings to foreign 

sources than would be the case if the allocation of earnings was based on actual economic activity.

5. Deferral of income from controlled foreign corporations (normal tax method).—Under the baseline tax system, the United 

States generally taxes the worldwide income of U.S. persons and business entities. In contrast, certain active income of foreign 

corporations controlled by U.S. shareholders is not subject to U.S. taxation when it is earned. The income becomes taxable only 

when the controlling U.S. shareholders receive dividends or other distributions from their foreign stockholding. The reference 

law tax baseline reflects this tax treatment where only realized income is taxed. Under the normal tax method, however, the 

currently attributable foreign source pre-tax income from such a controlling interest is considered to be subject to U.S. taxation, 

whether or not distributed. Thus, the normal tax method considers the amount of controlled foreign corporation income not yet 

distributed to a U.S. shareholder as tax-deferred income.

6. Deferred taxes for financial firms on certain income earned overseas.—The United States generally taxes the worldwide income of U.S. persons and business entities. The baseline tax system would not allow the deferral of tax or other relief targeted 

at particular industries or activities. In contrast, the Tax Code allows financial firms to defer taxes on income earned overseas in 

an active business. 

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 law baseline tax 

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.

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 

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 generous for 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 deduct 

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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 offers more generous tax treatment than would cost depletion, which would limit 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, 

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. 

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. For individuals, 

tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8-percent surtax on high income taxpayers), depending on the taxpayer’s income. In contrast, 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, and so benefit from the preferentially low 20 percent maximum tax rate

on capital gains. 

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.

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. 

14. 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, 2020. Facilities that begin construction in 2017 receive 80 percent of the credit, facilities that begin 

construction in 2018 receive 60 percent of the credit, and facilities that begin construction in 2019 receive 40 percent of the credit. Qualified facilities producing electricity from sources other than wind must begin construction before January 1, 2017. In 

addition to the electricity production credit, an income tax credit is allowed for the production of refined coal for facilities 

placed in service before January 1, 2012. The Tax Code also provided an income tax credit for Indian coal facilities. The Indian coal facilities credit expired on December 31, 2016. 

15. 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.

16. 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, small wind property and combined heat and power property. A temporary credit 

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of up to 30 percent is available for certain qualified property placed in service before January 1, 2017. For solar energy, a temporary credit is available for property for which construction begins before January 1, 2022, and which is placed in service before January 1, 2024. The credit is 30 percent for property that begins construction before 2020, 26 percent for property that 

begins construction in 2020, and 22 percent for property that begins construction in 2021. A permanent 10 percent credit is 

available for geothermal property placed in service after December 31, 2017 and for qualified solar property for which construction begins after December 31, 2021 or that is placed in service after December 31, 2023. . 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.

17. 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 provided an income tax credit for qualified cellulosic biofuel production which was renamed the Second generation biofuel producer credit. This provision expired on December 31, 2016. 

18. 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 allowed 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 expired on December 31, 2016. 

19. 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 investment-like 

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, 2016. 

20. 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. 

21. 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 which entitles 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.

22. Deferral of gain from dispositions of transmission property to implement FERC restructuring policy.—The baseline tax system generally would tax gains from sale of property when realized. It would not allow an exception for particular activities or 

individuals. However, the Tax Code allowed electric utilities to defer gains from the sale of their transmission assets to a FERCapproved independent transmission company. The sale of property must have been made prior to January 1, 2017. 

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. Temporary 50 percent expensing for equipment used in the refining of liquid fuels.—The baseline tax system allows the taxpayer to deduct the decline in the economic value of an investment over its economic life. However, the Tax Code provided for 

an accelerated recovery of the cost of certain investments in refineries by allowing partial expensing of the cost, thereby giving 

such investments a tax advantage. Qualified refinery property must have been placed in service before January 1, 2014.

25. Natural gas distribution pipelines treated as 15-year property.—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 depreciation of natural gas

distribution pipelines (placed in service between 2005 and 2011) over a 15 year period. These deductions are accelerated relative 

to deductions based on economic depreciation.

26. 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.

27. 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. This 

provision expired on December 31, 2016. 

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tivities, 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, 2016. 

29. 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, 2016. 

30. 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 for qualified solar electric and solar water

heating property is 30 percent for property placed in service before January 1, 2020, 26 percent for property placed in service in 

2020, and 22 percent for property placed in service in 2021. The credit for fuel cell, small wind, and geothermal heat pump 

property is 30 percent for property placed in service before January 1, 2017.

31. 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.

32. 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. 

33. 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 investment-like 

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.

34. 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% tax rate for investments made by Nuclear Decommissioning Reserve Funds.

Natural Resources and Environment

35. 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.

36. 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 revenue) 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 offers more generous tax 

treatment than would cost depletion, which would limit deductions to an investment’s cost.

37. 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.

38. 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 

capital-gains tax rate. For individuals, tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8-percent surtax on high income taxpayers), depending on the taxpayer’s 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). 

39. 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 

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

40. 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 under current law for certified rehabilitation activities. The taxpayer’s recoverable basis must 

be reduced by the amount of the credit. 

41. Industrial CO2 capture and sequestration tax 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 dioxide captured at a qualified facility and disposed of in secure geological storage. In addition, the provision 

allows a credit for qualified carbon dioxide 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 is not allowed after the end of the calendar year in which 75 million 

metric tons of qualified carbon dioxide are certified as having been taken into account.

42. 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

43. 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.

44. 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.

45. 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.

46. Capital gains treatment of certain income.—For individuals, tax rates on regular income vary from 10 percent to 39.6 

percent (plus a 3.8-percent surtax on high income taxpayers), depending on the taxpayer’s 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. 

47. 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.

48. 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.

49. 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 categories. For example, provisions related to investment, such as accelerated depreciation, could be classified under the energy, natural resources and environment, agriculture, or transportation categories.

50. 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 diviU.S. Department of the Treasury 

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dends are exempt from the income tax.

51. 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 excludes from tax amounts 

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

52. 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 $2.25 million of annual net written premiums generally may elect to pay tax only on their taxable 

investment income. Their underwriting income (premiums, less insurance losses and expenses) is excluded from tax.

53. 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 such exempt organizations as fraternal societies, voluntary employee benefit associations, and others are exempt from tax.

54. Small life insurance company deduction.— 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, small life insurance companies (with gross assets of less than $500 million) can deduct 60 

percent of the first $3 million of otherwise taxable income. The deduction phases out for otherwise taxable income between $3

million and $15 million.

55. 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 added of deposit services.

56. 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 firsttime, low-to-moderate-income buyers to be exempt from tax. These bonds are generally subject to the State private-activitybond annual volume cap.

57. 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.

58. 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 owner-occupied 

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.

59. Deduction for property taxes on real property.—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 owner-occupied housing 

services and also allows the owner-occupant to deduct property taxes paid on real property.

60. 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. 

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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.

61. 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.

62. 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.

63. 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. 

64. 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 70 percent 

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. 

65. Accelerated depreciation on rental housing.—Under an 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 law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, in contrast, depreciation allowances reflect estimates of economic depreciation.

66. 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, 2007, and before January 1, 2017.

67. 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 qualified 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.

68. 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 law but is under normal law. Current law 

also includes exceptions for certain property worth more than $250,000. These are tax expenditure under reference law and 

normal law. 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.

69. 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 (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 

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

70. 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. 

For individuals, tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8-percent surtax on high income taxpayers), depending on the taxpayer’s income. In contrast, 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). 

71. 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. 

72. 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. 

73. 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.

74. 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.

75. 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.

76. Depreciation of buildings other than rental housing.—Under an 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 law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, 

in contrast, depreciation allowances reflect estimates of economic depreciation.

77. Accelerated depreciation of machinery and equipment.—Under an 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. However, the depreciation provisions 

of the Tax Code are part of the reference law rules, and thus do not give rise to tax expenditures under reference law. Under 

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

78. Expensing of certain small investments.—Under the reference law baseline, the costs of acquiring 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, the Tax Code allows qualifying investments by small businesses in tangible property and certain computer software to be expensed rather than depreciated over time.

79. Graduated corporation income tax rate.—Because the corporate rate schedule is part of reference tax law, it is not considered a tax expenditure under the reference method. A flat corporation income tax rate is taken as the baseline under the normal 

tax method; therefore the lower rate is considered a tax expenditure under this concept.

80. 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.

81. Deduction for U.S. production activities.—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 for a deduction equal to a portion of taxable income attributable to domestic production.

82. Special rules for certain film and TV production.—The baseline tax system generally would tax all income under the reguU.S. Department of the Treasury 

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lar 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 expired at the end of 2016.

Transportation

83. 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. 

84. 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). 

85. 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 2017, the maximum amount of the parking exclusion is $255 per month. The tax expenditure estimate does not include any 

subsidy provided through employer-owned parking facilities.

86. 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 $255 per month in 2017. 

87. 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 track owned or leased. 

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

88. 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

89. Investment credit for rehabilitation of structures.—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 allows a 10-percent investment 

tax credit for the rehabilitation of buildings that are used for business or productive activities and that were erected before 1936 

for other than residential purposes. The taxpayer’s recoverable basis must be reduced by the amount of the credit. 

90. 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 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.

91. 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 revenues are derived from patron service 

charges.

92. 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 allowed qualifying businesses in designated economically depressed areas to 

receive tax benefits such as an employment credit, increased expensing of investment in equipment, special tax-exempt financing, and certain capital gains incentives. A taxpayer’s ability to accrue new tax benefits for empowerment zones expired on December 31, 2016. 

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

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(CDE), which then made 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 $3.5 billion for each calendar year 2010 through 

2019, the last year for which credit allocations are authorized. 

94. 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.

95. 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.

96. 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.

Education, Training, Employment, and Social Services

97. Exclusion of scholarship and fellowship income.—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 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).

98. Tax credits and deductions for post-secondary education expenses.—The baseline tax system would not allow credits for 

particular activities, investments, or industries. Under current law in 2017, however, there were two credits for certain postsecondary education expenses. A deduction for post-secondary expenses expired at the end of 2016. The American Opportunity 

Tax Credit allows a partially refundable credit of up to $2,500 per eligible student for qualified tuition and related expenses paid 

during each of the first four years of the student’s post-secondary education. The credit is 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. The Lifetime Learning Credit allows a non-refundable credit for 20 percent of an eligible student’s qualified tuition and fees, up to a maximum credit per return of $2,000. In 2017, the credit is phased out ratably for taxpayers with modified 

AGI between $112,000 and $132,000 if married filing jointly ($56,000 and $66,000 for other taxpayers), indexed. The credit can 

be claimed in any year in which post-secondary education expenses are incurred. The deduction for post-secondary education 

expenses provides a maximum deduction of $4,000 for qualified post-secondary education expenses for taxpayers with modified 

adjusted gross income up to $130,000 if married filing jointly ($65,000 for other taxpayers). Taxpayers with modified adjusted 

gross income up to $160,000 if married filing jointly ($80,000 for other taxpayers) could deduct up to $2,000 of qualified postsecondary education expenses. This provision expired on December 31, 2016.

99. Education Individual Retirement Accounts (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. 

While contributions to an education IRA are not tax-deductible under current law, investment income earned by education 

IRAs is not taxed when earned, and investment income from an education IRA is tax-exempt when withdrawn to pay for a 

student’s education expenses. The maximum contribution to an education IRA in 2017 is $2,000 per beneficiary. In 2017, the 

maximum contribution is phased down ratably for taxpayers with modified AGI between $190,000 and $220,000 if married 

filing jointly ($95,000 and $110,000 for other taxpayers).

100. 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 2017, the maximum deduction is phased down ratably for taxpayers with modified AGI between $135,000 and $165,000 if married filing jointly ($65,000 and $80,000 for other taxpayers).

101. Qualified tuition programs.—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.

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102. 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.

103. 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.

104. 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. 

105. 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 $117,250 and $147,250 if married filing jointly ($78,150 and $93,150 for other taxpayers) in 2017. 

106. 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. To be considered a dependent, a child would have to be under age 19. In contrast, the Tax Code allows taxpayers to claim personal exemptions for children aged 19 to 23, 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).

107. 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 of adjusted gross income; a corporation’s total charitable contributions generally may 

not exceed 10 percent of pre-tax income.

108. Exclusion of employer-provided educational assistance.—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, 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.

109. 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).

110. 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.

111. 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.

112. 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, 2019 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 wagU.S. Department of the Treasury 

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es 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. 

113. 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, under current law up to $5,000 of employerprovided child care is excluded from an employee’s gross income even though the employer’s costs for the child care are a deductible business expense.

114. 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.

115. 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.

116. 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. 

117. Exclusion of employee meals and lodging.—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 meals 

and lodging are excluded from an employee’s gross income even though the employer’s costs for these items are a deductible 

business expense.

118. 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 parents who work or attend school and who have child 

and dependent care expenses a tax credit. Expenditures up to a maximum $3,000 for one dependent and $6,000 for two or more 

dependents are eligible for the 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.

119. 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. 

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

121. 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. 

122. 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.

123. 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 he or she 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, 2016.

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124. 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

125. 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) are not 

included in employee gross income even though they are deducted as a business expense by the employee.

126. 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 

self-employed 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. 

127. 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 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 2017, $3,350 for taxpayers with individual coverage and $6,750 for taxpayers with family coverage). Thus, HSAs have largely replaced MSAs.

128. 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 turns 65 before the end of the taxable year, the threshold remains at 7.5 percent of adjusted income. Beginning in 2017, the 10-percent threshold will apply to all taxpayers, including those over 65.

129. 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.

130. 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% and 400% 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. 

131. 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 fulltime-equivalent 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 

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

132. 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.

133. 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 50 percent of the costs for clinical 

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

134. 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. Qualifying insurers may take as a deduction 100 percent of any net increase in 

their unearned premium reserves, instead of the 80 percent allowed other insurers. Qualifying insurers are also allowed a special 

deduction equal to the amount by which 25 percent of an insurer’s 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.

135. Tax credit for health insurance purchased by certain displaced and retired individuals.—The baseline tax system 

would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides a refundable tax 

credit of 72.5 percent for the purchase of health insurance coverage by individuals eligible for Trade Adjustment Assistance and 

certain Pension Benefit Guarantee Corporation pension recipients. This provision will expire on December 31, 2019.

136. 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.

Income Security

137.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 17 can qualify for a $1,000 partially refundable per child credit. 

Any unclaimed credit due to insufficient tax liability may be refundable – taxpayers may claim a refund for 15 percent of earnings in excess of a $3,000 floor, up to the amount of unused credit. Alternatively, taxpayers with three or more children may 

claim a refund of the amount of payroll taxes paid in excess of the Earned Income Tax Credit received (up to the amount of 

unused credit) if this results in a larger refund. The credit is phased out for taxpayers 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). 

138. 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 is not generally subject to the income tax unless the recipient’s gross income reaches a certain 

threshold under current law. See provision number 158, Social Security benefits for retired workers, for discussion of the 

threshold. 

139. 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.

140. Exclusion of public assistance benefits.—Under the reference law baseline tax system, 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. 

141. 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.

142. 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 

received by current disabled military retirees is excluded from their income subject to tax.

143. 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.

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144. 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 2017, an employee could exclude up 

to $18,000 of wages from AGI under a qualified arrangement with an employer’s 401(k) plan. Employees age 50 or over could 

exclude up to $24,000 in contributions. The defined contribution plan limit, including both employee and employer contributions, is $54,000 in 2017. The tax on contributions made by both employees and employers and the investment income earned 

by these plans is deferred until withdrawn.

145. 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 $5,500 in 2017; 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 who, or whose 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.

146. 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 $62,000 for joint filers, $46,500 for head of 

household filers, and $31,000 for other filers in 2017. 

147. 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 $54,000 in 2017. 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. 

148. 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. 

149. 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 employerprovided 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.

150. 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.

151. 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.

152. Special ESOP rules.—ESOPs are a special type of tax-exempt employee benefit plan. 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 ownership 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 his payment (deductible by him) 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.

153. Additional deduction for the blind.—Under the baseline tax system, the standard deduction is allowed. An addiU.S. Department of the Treasury 

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tional 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 $1,550 standard deduction if single, or $1,250 if married in 2017. 

154. 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 $1,550 standard deduction if single, or $1,250 if married in 

2017. 

155. Tax credit for the elderly and disabled.—Under the baseline tax system, a credit targeted at a specific group within a given filing status or for particular activities would not be allowed. In contrast, the Tax Code allows taxpayers who are 65 

years of age or older, or who are permanently disabled, to claim a non-refundable tax credit equal to 15 percent of the sum of 

their earned and retirement income. The amount to which the 15-percent rate is applied is limited to no more than $5,000 for 

single individuals or married couples filing a joint return where only one spouse is 65 years of age or older or disabled, and up 

to $7,500 for joint returns where both spouses are 65 years of age or older or disabled. These limits are reduced by one-half of 

the taxpayer’s adjusted gross income over $7,500 for single individuals and $10,000 for married couples filing a joint return. 

156. 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.

157. 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. For a family with one qualifying child, the credit is 34 percent of the first $10,000 of earned income in 2017. 

The credit is 40 percent of the first $14,040 of income for a family with two qualifying children, and it is 45 percent of the first 

$14,040 of income for a family with three or more qualifying children. Low-income workers with no qualifying children are 

eligible for a 7.65-percent credit on the first $6,670 of earned income. The credit is phased out at income levels and rates which 

depend upon how many qualifying children are eligible and marital status. In 2017, the phase-down for married filers begins at 

incomes $5,590 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. 

Social Security

158. 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 treated in a similar manner. Railroad Social Security Equivalent benefits are treated like Social Security benefits. See 

also provision number 138, Exclusion of railroad Social Security equivalent benefits.

159. 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

160. 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.

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

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19
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.

162. 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.

163. 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

164. 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.

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

specific group. 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.

166. 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 59.)

Interest

167. 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.

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2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

National Defense

1 12,400 12,830 11,640 11,680 12,040 12,520 13,040 13,590 14,190 14,820 15,490 131,840

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,600 6,930 7,280 7,640 8,020 8,420 8,840 9,290 9,750 10,240 10,750 87,160

3 1,370 1,430 1,510 1,580 1,660 1,740 1,830 1,920 2,020 2,120 2,230 18,040

4 Inventory property sales source rules exception 3,320 3,570 3,840 4,170 4,480 4,760 5,070 5,410 5,780 6,180 6,640 49,900

5 107,200 112,560 118,190 124,100 130,310 136,820 143,660 150,850 158,390 166,310 174,620 1,415,810

6 16,080 16,880 17,730 18,620 19,550 20,520 21,550 22,630 23,760 24,950 26,190 212,380

General science, space, and technology: 

7 8,330 8,340 9,140 10,100 10,910 11,640 12,310 13,040 13,820 14,660 15,540 119,500

8 Credit for increasing research activities 11,500 12,250 13,010 13,820 14,680 15,600 16,580 17,630 18,730 19,900 21,140 163,340

Energy: 

9 -650 -290 -30 120 200 260 290 290 300 350 370 1,860

10 Excess of percentage over cost depletion, fuels 440 550 600 640 700 830 990 1,110 1,210 1,360 1,510 9,500

11 20 20 20 20 20 30 30 30 30 30 30 260

12 Capital gains treatment of royalties on coal 140 160 150 140 150 150 160 160 170 180 190 1,610

13 Exclusion of interest on energy facility bonds 10 10 10 10 10 10 10 30 30 30 30 180

14 Enhanced oil recovery credit 270 350 400 450 440 460 500 530 510 490 440 4,570

15 Energy production credit 1/ 1,590 2,230 2,870 3,430 3,880 4,280 4,600 4,790 4,850 4,750 4,440 40,120

16 Marginal wells credit 70 110 70 30 30 40 100 140 180 210 230 1,140

17 Energy investment credit 1/ 1,850 3,410 3,470 3,330 3,330 2,710 1,630 670 80 -120 -150 18,360

18 Alcohol fuel credits 2/ 20 0 0 0 0 0 0 0 0 0 0 0

19 40 0 0 0 0 0 0 0 0 0 0 0

20 590 680 670 490 360 330 280 240 180 130 100 3,460

21 Exclusion of utility conservation subsidies 470 490 520 540 570 590 620 650 680 710 750 6,120

22 Credit for holding clean renewable energy bonds 4/ 70 70 70 70 70 70 70 70 70 70 70 700

23 -190 -270 -210 -190 -150 -120 -70 -20 0 0 0 -1,030

24 Credit for investment in clean coal facilities 140 110 100 250 320 190 20 -20 -10 -10 -10 940

25 -1,380 -1,140 -930 -740 -560 -370 -180 -40 0 0 0 -3,960

26 140 150 150 150 120 60 -20 -100 -190 -270 -320 -270

27 70 60 70 70 70 80 70 60 40 40 50 610

28 30 -10 -30 -30 -30 -30 -30 -30 -30 -30 -30 -280

29 Credit for construction of new energy efficient homes 170 70 10 0 0 0 0 0 0 0 0 80

30 290 0 0 0 0 0 0 0 0 0 0 0

31 Credit for residential energy efficient property 1,430 1,380 1,360 1,250 1,060 530 120 20 0 0 0 5,720

32 Qualified energy conservation bonds 5/ 30 30 30 30 30 30 30 30 30 30 30 300

33 Advanced Energy Property Credit 50 0 -20 -20 -10 -10 0 0 0 0 0 -60

34 Advanced nuclear power production credit 0 0 170 440 550 550 550 550 550 550 550 4,460

35 Reduced tax rate for nuclear decommissioning funds 210 230 240 260 270 280 290 310 320 340 350 2,890

Expensing of exploration and development costs, 

fuels 

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027

(in millions of dollars)

Total from corporations and individuals

Deferral of income from controlled foreign 

corporations (normal tax method) 

Expensing of research and experimentation 

expenditures (normal tax method) 

Exclusion of certain allowances for Federal 

employees abroad

Exclusion of benefits and allowances to armed forces 

personnel 

Deferred taxes for financial firms on certain income 

earned overseas

Exception from passive loss limitation for working 

interests in oil and gas properties 

Deferral of gain from dispositions of transmission 

property to implement FERC restructuring policy

Temporary 50% expensing for equipment used in the 

refining of liquid fuels

Allowance of deduction for certain energy efficient 

commercial building property

Bio-Diesel and small agri-biodiesel producer tax 

credits 3/

Tax credits for clean-fuel burning vehicles and 

refueling property

Natural gas distribution pipelines treated as 15-year 

property

Amortize all geological and geophysical expenditures 

over 2 years

Credit for energy efficiency improvements to existing 

homes

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2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from corporations and individuals

Natural resources and environment: 

36 40 50 50 50 50 50 50 50 50 50 50 500

37 140 140 150 150 150 150 150 150 140 140 140 1,460

38 420 410 420 420 450 500 540 580 610 650 680 5,260

39 Capital gains treatment of certain timber income 140 160 150 140 150 150 160 160 170 180 190 1,610

40 Expensing of multiperiod timber growing costs 340 350 350 360 370 400 400 410 410 420 420 3,890

41 Tax incentives for preservation of historic structures 500 510 520 530 540 550 560 570 590 600 610 5,580

42 Industrial CO2 capture and sequestration tax credit 190 200 200 0 0 0 0 0 0 0 0 400

43 30 30 30 40 50 50 50 50 70 70 80 520

Agriculture: 

44 Expensing of certain capital outlays 190 200 210 220 240 250 260 270 280 290 300 2,520

45 Expensing of certain multiperiod production costs 310 320 330 340 350 370 390 410 420 440 450 3,820

46 Treatment of loans forgiven for solvent farmers 40 50 50 50 50 50 60 60 60 60 70 560

47 Capital gains treatment of certain income 1,360 1,550 1,470 1,450 1,480 1,520 1,580 1,640 1,720 1,800 1,890 16,100

48 Income averaging for farmers 140 150 160 170 180 180 190 200 210 220 230 1,890

49 Deferral of gain on sale of farm refiners 20 20 20 20 20 20 20 20 20 30 30 220

50 Expensing of reforestation expenditures 60 50 60 60 60 70 70 80 80 80 80 690

Commerce and housing: 

Financial institutions and insurance: 

51 Exemption of credit union income 2,918 2,901 3,053 3,113 3,246 3,450 3,648 3,839 3,967 4,170 4,372 35,759

52 14,750 15,450 16,290 17,210 18,500 19,810 20,970 22,070 23,220 24,420 25,560 203,500

53 50 50 60 60 60 60 70 70 80 80 80 670

54 720 750 790 840 890 920 950 980 1,000 1,030 1,060 9,210

55 Small life insurance company deduction 30 30 30 30 40 40 40 40 40 40 50 380

56 Exclusion of interest spread of financial institutions 160 240 280 290 300 310 320 330 340 350 360 3,120

Housing: 

57 1,150 1,120 1,150 1,160 1,230 1,360 1,490 1,620 1,710 1,790 1,860 14,490

58 Exclusion of interest on rental housing bonds 1,060 1,040 1,070 1,080 1,140 1,260 1,370 1,490 1,580 1,650 1,710 13,390

59 65,600 69,130 74,510 81,330 89,030 96,840 104,490 111,810 118,900 125,560 131,630 1,003,230

60 33,710 35,790 38,190 40,920 43,750 46,600 49,550 52,700 55,940 59,230 62,680 485,350

61 Deferral of income from installment sales 1,590 1,760 1,700 1,690 1,730 1,770 1,830 1,900 1,970 2,050 2,140 18,540

62 Capital gains exclusion on home sales 43,220 43,870 44,550 45,380 46,160 46,870 47,710 48,630 49,500 50,370 51,280 474,320

63 Exclusion of net imputed rental income 121,350 126,000 131,110 136,680 142,590 148,830 155,330 162,180 169,480 177,100 185,370 1,534,670

64 7,410 7,710 8,060 8,390 8,730 9,080 9,440 9,750 10,100 10,490 10,860 92,610

65 Credit for low-income housing investments 8,310 8,410 8,960 9,090 9,270 9,480 9,720 9,990 10,270 10,600 10,920 96,710

66 2,090 2,680 3,510 4,370 5,050 5,860 6,660 7,410 8,130 8,810 9,470 61,950

67 Discharge of mortgage indebtedness 310 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

68 Discharge of business indebtedness -70 0 10 0 10 30 40 40 40 40 50 260

69 Exceptions from imputed interest rules 60 60 60 70 70 80 80 80 90 90 100 780

70 Treatment of qualified dividends 27,550 29,130 30,700 32,460 34,420 36,580 38,940 41,500 44,310 47,290 50,440 385,770

71 101,510 115,910 109,880 107,970 110,230 113,500 117,650 122,620 128,280 134,450 141,100 1,201,590

72 Capital gains exclusion of small corporation stock 790 1,020 1,240 1,400 1,520 1,630 1,730 1,830 1,900 1,980 2,050 16,300

73 Step-up basis of capital gains at death 37,910 38,710 39,560 40,160 40,560 41,240 41,860 42,620 43,230 43,820 44,540 416,300

74 Carryover basis of capital gains on gifts 5,190 4,840 4,670 4,560 4,530 4,530 4,560 4,640 4,700 4,730 4,780 46,540

75 70 80 80 80 80 80 90 90 90 100 100 870

76 Deferral of gains from like-kind exchanges 7,690 8,080 8,500 8,920 9,360 9,830 10,320 10,840 11,380 11,940 12,490 101,660

77 -8,800 -8,970 -9,570 -10,250 -10,770 -11,360 -11,990 -12,690 -13,130 -13,510 -13,980 -116,220

78 44,300 36,740 26,380 -9,310 -9,550 5,100 14,730 23,590 31,120 37,050 42,050 197,900

79 3,410 3,400 3,710 7,540 7,910 6,970 6,740 6,700 6,770 7,020 7,230 63,990

80 1,550 1,510 1,440 1,430 1,350 1,330 1,280 1,250 1,180 1,180 1,150 13,100

81 Exclusion of interest on small issue bonds 140 150 140 140 160 180 190 200 220 220 240 1,840

82 Deduction for US production activities 13,520 14,150 14,790 15,500 16,280 17,090 17,950 18,850 19,790 20,790 21,830 177,020

83 Special rules for certain film and TV production 200 110 60 30 0 0 0 0 0 0 0 200

Capital gains (except agriculture, timber, iron ore, and 

coal)

Expensing of certain small investments (normal tax 

method) 

Graduated corporation income tax rate (normal tax 

method) 

Exclusion of interest on owner-occupied mortgage 

subsidy bonds 

Deductibility of mortgage interest on owner-occupied 

homes 

Deductibility of State and local property tax on owneroccupied homes 

Exception from passive loss rules for $25,000 of 

rental loss 

Accelerated depreciation on rental housing (normal 

tax method) 

Exemption or special alternative tax for small property 

and casualty insurance companies 

Ordinary income treatment of loss from small 

business corporation stock sale 

Depreciation of buildings other than rental housing 

(normal tax method) 

Accelerated depreciation of machinery and equipment 

(normal tax method) 

Tax exemption of insurance income earned by taxexempt organizations

Exclusion of life insurance death benefits

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

Expensing of exploration and development costs, 

nonfuel minerals 

Excess of percentage over cost depletion, nonfuel 

minerals 

Deduction for endangered species recovery 

expenditures

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2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from corporations and individuals

Transportation: 

84 Tonnage tax 80 80 90 90 90 100 100 110 110 120 130 1,020

85 Deferral of tax on shipping companies 20 20 20 20 20 20 20 20 20 20 20 200

86 Exclusion of reimbursed employee parking expenses 3,202 3,319 3,452 3,582 3,731 3,862 3,971 4,117 4,257 4,404 4,571 39,266

87 Exclusion for employer-provided transit passes 1,123 1,192 1,270 1,355 1,446 1,532 1,613 1,719 1,819 1,934 2,054 15,934

88 60 0 0 0 0 0 0 0 0 0 0 0

89 200 190 170 170 160 160 140 140 130 130 120 1,510

Community and regional development: 

90 20 20 20 20 20 20 20 20 20 20 20 200

91 660 650 660 680 720 790 860 930 990 1,040 1,080 8,400

92 150 150 150 160 160 160 170 170 180 180 190 1,670

93 Empowerment zones 110 50 30 30 10 10 10 0 0 0 0 140

94 New markets tax credit 1,460 1,410 1,320 1,280 1,210 1,090 880 570 290 80 -120 8,010

95 Credit to holders of Gulf Tax Credit Bonds. 240 250 270 300 320 350 380 400 420 430 440 3,560

96 Recovery Zone Bonds 6/ 130 140 150 160 180 190 210 220 230 240 250 1,970

97 Tribal Economic Development Bonds 40 40 40 50 50 60 60 70 70 70 80 590

Education, training, employment, and social services: 

Education: 

98 3,300 3,410 3,490 3,650 3,800 3,970 4,140 4,310 4,500 4,690 4,890 40,850

99 16,460 16,360 16,320 16,310 16,290 16,190 16,180 16,170 16,120 16,020 15,980 161,940

100 Education Individual Retirement Accounts 30 30 40 40 40 40 40 40 30 30 30 360

101 Deductibility of student-loan interest 2,340 2,360 2,390 2,500 2,510 2,520 2,610 2,610 2,630 2,650 2,670 25,450

102 Qualified tuition programs 1,950 2,140 2,330 2,530 2,730 2,940 3,150 3,380 3,600 3,830 4,070 30,700

103 Exclusion of interest on student-loan bonds 370 370 370 380 400 440 480 520 550 580 600 4,690

104 2,250 2,200 2,260 2,280 2,410 2,660 2,900 3,160 3,330 3,510 3,640 28,350

105 Credit for holders of zone academy bonds 8/ 170 180 170 150 130 110 90 80 60 50 50 1,070

106 30 30 30 30 40 40 40 40 50 50 50 400

107 9,600 9,500 9,490 9,500 9,540 9,590 9,630 9,670 9,700 9,770 9,940 96,330

108 Deductibility of charitable contributions (education) 5,480 5,890 6,330 6,730 7,100 7,490 7,860 8,250 8,630 9,000 9,370 76,650

109 900 940 990 1,040 1,100 1,150 1,210 1,270 1,340 1,400 1,480 11,920

110 Special deduction for teacher expenses 200 210 200 210 250 250 250 260 260 260 270 2,420

111 Discharge of student loan indebtedness 100 100 100 110 110 110 110 120 120 120 120 1,120

112 Qualified school construction bonds 9/ 650 650 650 650 650 650 650 650 650 650 650 6,500

Training, employment, and social services: 

113 Work opportunity tax credit 1,320 1,340 1,370 990 490 310 230 180 130 100 70 5,210

114 Employer provided child care exclusion 900 900 940 970 1,000 1,030 1,060 1,100 1,140 1,180 1,220 10,540

115 Employer-provided child care credit 10 10 10 10 10 10 10 10 10 10 10 100

116 Assistance for adopted foster children 590 620 660 690 730 780 820 860 910 950 1,000 8,020

117 Adoption credit and exclusion 620 620 650 620 640 690 690 710 690 710 720 6,740

118 4,830 4,990 5,150 5,290 5,440 5,590 5,750 5,910 6,060 6,220 6,380 56,780

119 Credit for child and dependent care expenses 4,600 4,690 4,790 4,890 4,960 5,060 5,140 5,220 5,300 5,370 5,440 50,860

120 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

121 47,760 51,720 55,030 58,590 61,930 65,250 68,510 71,820 75,090 78,270 81,870 668,080

122 Exclusion of certain foster care payments 490 510 530 550 570 590 610 620 640 660 680 5,960

123 Exclusion of parsonage allowances 920 970 1,021 1,075 1,132 1,192 1,255 1,322 1,392 1,465 1,543 12,367

124 Indian employment credit 40 20 20 20 20 10 10 10 10 10 10 140

125 Credit for employer differential wage payments 0 0 10 10 10 20 20 20 20 20 20 150

Exclusion of interest for airport, dock, and similar 

bonds

Exemption of certain mutuals' and cooperatives' 

income 

Exclusion of scholarship and fellowship income 

(normal tax method) 

Tax credits and deductions for postsecondary 

education expenses 7/

Parental personal exemption for students age 19 or 

over 

Exclusion of employee meals and lodging (other than 

military) 

Exclusion of employer-provided educational 

assistance 

Tax credit for certain expenditures for maintaining 

railroad tracks

Investment credit for rehabilitation of structures (other 

than historic) 

Exclusion of interest on bonds for private nonprofit 

educational facilities 

Exclusion of interest on savings bonds redeemed to 

finance educational expenses

Deductibility of charitable contributions, other than 

education and health

Exclusion of interest on bonds for Highway Projects 

and rail-truck transfer facilities

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

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2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from corporations and individuals

Health: 

126 214,280 227,880 242,880 257,390 273,180 291,180 309,500 328,620 349,300 370,360 393,430 3,043,720

127 Self-employed medical insurance premiums 8,140 8,170 7,750 8,010 8,460 8,830 9,220 9,640 10,110 10,610 11,170 91,970

128 Medical Savings Accounts / Health Savings Accounts 8,240 9,400 10,650 11,730 12,750 13,820 14,830 15,770 16,720 17,700 18,730 142,100

129 Deductibility of medical expenses 9,720 10,030 10,870 11,850 12,840 13,790 14,790 15,830 16,910 18,090 19,400 144,400

130 Exclusion of interest on hospital construction bonds 3,380 3,310 3,400 3,430 3,630 4,000 4,370 4,740 5,010 5,260 5,470 42,620

131 Refundable Premium Assistance Tax Credit 11/ 5,630 6,310 7,100 7,740 8,380 8,910 9,370 10,040 10,590 11,390 12,140 91,970

132 90 80 70 50 30 20 10 10 10 10 10 300

133 Deductibility of charitable contributions (health) 5,120 5,530 5,960 6,350 6,710 7,080 7,430 7,790 8,150 8,500 8,860 72,360

134 Tax credit for orphan drug research 2,280 2,760 3,340 4,030 4,880 5,900 7,140 8,630 10,450 12,630 15,290 75,050

135 Special Blue Cross/Blue Shield tax benefits 590 610 630 670 700 740 780 820 870 910 960 7,690

136 30 20 10 0 0 0 0 0 0 0 0 30

137 460 480 500 520 540 560 580 600 620 650 670 5,720

Income security: 

138 Child credit 14/ 24,340 24,270 23,960 23,580 23,140 22,690 22,270 21,860 21,410 20,980 20,610 224,770

139 290 280 280 270 260 250 240 220 210 190 170 2,370

140 Exclusion of workers' compensation benefits 9,970 10,040 10,110 10,180 10,250 10,320 10,390 10,470 10,540 10,610 10,690 103,600

141 590 600 620 640 670 680 700 730 740 750 660 6,790

142 Exclusion of special benefits for disabled coal miners 20 20 20 20 20 10 10 10 10 10 10 140

143 Exclusion of military disability pensions 170 180 180 190 190 200 200 210 210 220 220 2,000

Net exclusion of pension contributions and earnings: 

144 Defined benefit employer plans 76,091 76,998 77,341 78,453 77,081 75,678 73,516 71,376 68,657 65,592 61,673 726,365

145 Defined contribution employer plans 69,440 71,270 80,480 87,010 89,310 95,400 112,200 122,030 126,140 130,240 137,820 1,051,900

146 Individual Retirement Accounts 17,320 19,110 20,630 22,180 23,790 25,460 27,100 28,150 29,080 29,880 30,640 256,020

147 Low and moderate income savers credit 1,440 1,470 1,470 1,460 1,440 1,440 1,440 1,440 1,420 1,450 1,430 14,460

148 Self-Employed plans 28,460 26,980 30,010 33,390 36,930 40,280 44,000 48,070 52,400 57,060 62,170 431,290

Exclusion of other employee benefits: 

149 Premiums on group term life insurance 3,350 3,140 3,250 3,370 3,500 3,630 3,770 3,910 4,070 4,230 4,390 37,260

150 Premiums on accident and disability insurance 330 330 330 330 340 340 340 350 350 350 350 3,410

151 20 30 40 40 50 50 50 50 60 60 60 490

152 1,180 1,240 1,290 1,350 1,420 1,480 1,550 1,630 1,710 1,780 1,860 15,310

153 Special ESOP rules 2,080 2,140 2,210 2,280 2,360 2,430 2,510 2,580 2,660 2,740 2,820 24,730

154 Additional deduction for the blind 30 30 30 30 40 40 40 50 50 60 60 430

155 Additional deduction for the elderly 3,470 3,770 4,050 4,380 4,780 5,090 5,470 5,850 6,290 6,810 7,380 53,870

156 Tax credit for the elderly and disabled 10 10 10 0 0 0 0 0 0 0 0 20

157 Deductibility of casualty losses 330 350 380 400 430 460 500 530 560 590 630 4,830

158 Earned income tax credit 15/ 1,760 1,810 3,960 4,100 2,060 2,150 2,250 2,370 2,500 2,570 2,700 26,470

Social Security: 

Exclusion of social security benefits: 

159 34,500 36,110 37,660 39,430 41,430 43,840 46,830 48,780 50,130 53,690 57,850 455,750

160 1,040 1,080 1,130 1,190 1,250 1,310 1,380 1,440 1,520 1,590 1,680 13,570

Veterans benefits and services: 

161 7,920 8,620 9,190 9,560 9,910 10,290 10,680 11,090 11,520 11,960 12,440 105,260

162 Exclusion of veterans pensions 480 510 540 560 580 610 630 660 690 720 750 6,250

163 Exclusion of GI bill benefits 1,740 1,830 1,910 2,010 2,110 2,220 2,330 2,440 2,570 2,700 2,840 22,960

164 Exclusion of interest on veterans housing bonds 10 10 10 10 10 10 10 30 30 30 30 180

General purpose fiscal assistance: 

165 28,560 27,920 28,650 28,950 30,680 33,830 36,880 40,060 42,290 44,470 46,160 359,890

166 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

167 70,420 74,980 80,190 86,220 91,900 97,460 103,350 109,610 116,020 122,310 128,980 1,011,020

Interest: 

168 Deferral of interest on U.S. savings bonds 960 950 940 930 930 920 910 900 890 880 890 9,140

Exclusion of veterans death benefits and disability 

compensation 

Exclusion of interest on public purpose State and 

local bonds

Credit for employee health insurance expenses of 

small business 12/

Exclusion of railroad retirement (Social Security 

equivalent) benefits 

Exclusion of public assistance benefits (normal tax 

method) 

Income of trusts to finance supplementary 

unemployment benefits 

Income of trusts to finance voluntary employee 

benefits associations 

Credit for certain employer contributions to social 

security

Social Security benefits for retired and disabled 

workers and spouses, dependents and survivors

Deductibility of nonbusiness State and local taxes 

other than on owner-occupied homes 

Exclusion of employer contributions for medical 

insurance premiums and medical care 10/

Tax credit for health insurance purchased by certain 

displaced and retired individuals 13/

Distributions from retirement plans for premiums for 

health and long-term care insurance

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

24
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from corporations and individuals

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 33,710 35,790 38,190 40,920 43,750 46,600 49,550 52,700 55,940 59,230 62,680 485,350

70,420 74,980 80,190 86,220 91,900 97,460 103,350 109,610 116,020 122,310 128,980 1,011,020

Exclusion of interest on State and local bonds for: 

Public purposes 28,560 27,920 28,650 28,950 30,680 33,830 36,880 40,060 42,290 44,470 46,160 359,890

Energy facilities 10 10 10 10 10 10 10 30 30 30 30 180

420 410 420 420 450 500 540 580 610 650 680 5,260

Small-issues 140 150 140 140 160 180 190 200 220 220 240 1,840

Owner-occupied mortgage subsidies 1,150 1,120 1,150 1,160 1,230 1,360 1,490 1,620 1,710 1,790 1,860 14,490

Rental housing 1,060 1,040 1,070 1,080 1,140 1,260 1,370 1,490 1,580 1,650 1,710 13,390

Airports, docks, and similar facilities 660 650 660 680 720 790 860 930 990 1,040 1,080 8,400

Student loans 370 370 370 380 400 440 480 520 550 580 600 4,690

Private nonprofit educational facilities 2,250 2,200 2,260 2,280 2,410 2,660 2,900 3,160 3,330 3,510 3,640 28,350

Hospital construction 3,380 3,310 3,400 3,430 3,630 4,000 4,370 4,740 5,010 5,260 5,470 42,620

Veterans' housing 10 10 10 10 10 10 10 30 30 30 30 180

1/

2/ The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2017 $420 and $0 thereafter.

3/ In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2017 $2,090 and $0 thereafter.

4/ In addition, the credit for holding clean renewable energy bonds has outlay effects of (in millions of dollars):

2017 $40; 2018 $40; 2019 $40; 2020 $40; 2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025, $40; 2026 $40; and 2027 $40.

5/ In addition, the qualified energy conservation bonds have outlay effects of (in millions of dollars):

2017 $40; 2018 $40; 2019 $40; 2020 $40; 2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025, $40; 2026 $40; and 2027 $40.

6/ In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows:

2017 $290; 2018 $290; 2019 $290; 2020 $290; 2021 $290; 2022 $290; 2023 $290; 2024 $290; 2025, $290; 2026 $290; and 202 $290.

7/ In addition, the tax credits and deductions for postsecondary education expenses have outlay effects of (in millions of dollars):

2017 $5,770; 2018 $5,690; 2019 $5,570; 2020 $5,520; 2021 $5,460; 2022 $5,410; 2023 $5,360; 2024 $5,310; 2025 $5,240; 2026 $5,170; and 2027 $5,100.

8/ In addition, the credit for holders of zone academy bonds has outlay effects of (in millions of dollars):

2017 $60; 2018 $60; 2019 $60; 2020 $60; 2021 $60; 2022 $60; 2023 $60; 2024 $60; 2025 $60; 2026 $60; and 2027 $60.

9/ In addition, the provision for school construction bonds has outlay effects of (in millions of dollars):

2017 $740; 2018 $795; 2019 $795; 2020 $795; 2021 $795; 2022 $795; 2023 $795; 2024 $795; 2025 $795; 2026 $795; and 2027 $795.

10/ In addition, the employer contributions for health have effects on payroll tax receipts (in millions of dollars) as follows: 2017 $127,140; 2018 $133,530; 2019 $140,060;

11/ In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows:

2017 $29,730; 2018 $31,890; 2019 $33,840; 2020 $35,720; 2021 $37,770; 2022 $40,010; 2023 $42,110; 2024 $44,400; 2025 $46,790; 2026 $49,340; and 2027 $51,980. 

12/ In addition, the small business credit provision has outlay effects (in millions of dollars) as follows:

2017 $20; 2018 $20; 2019 $10; 2020 $10; 2021 $10; 2022 $10; and $0 thereafter.

13/ In addition, the effect of the health coverage tax credit on receipts has outlay effects of (in millions of dollars)

2017 $20; 2018 $30; 2019 $30; 2020 $10; and $0 thereafter.

14/ In addition, the effect of the child tax credit on receipts has outlay effects of (in millions of dollars):

2017 $29,980; 2018 $30,000; 2019 $30,010; 2020 $30,010; 2021 $30,270; 2022 $30,390; 2023 $30,540; 2024 $30,680; 2025 $30,840; 2026 $31,040; and 2027 $31,150.

15/ In addition, the earned income tax credit on receipts has outlay effects of (in millions of dollars):

2017 $62,070; 2018 $67,870; 2019 $ 67,120; 2020 $68,500; 2021 $72,630; 2022 $74,420; 2023 $76,390; 2024 $78,260; 2025 $80,240; 2026 $82,240; and 2027 $84,150.

16/ In addition, the Build America Bonds have outlay effects of (in millions of dollars):

2017 $3,610; 2018 $3,610; 2019 $3,610; 2020 $3,610; 2021 $3,610; 2022 $3,610; 2023 $3,610; 2024 $3,610; 2025, $3,610; 2026 $3,610; and 2027 $3,610.

Note: Provisions with estimates denoted normal tax method have no revenue loss under the reference tax law method.

All estimates have been rounded to the nearest $10 million. Provisions with estimates that rounded to zero in each year are not included in the table.

Water, sewage, and hazardous waste disposal 

facilities 

2020 $146,970; 2021 $155,010; 2022 $164,100; 2023 $173,140; 2024 $182,640; 2025 $192,960; 2026 $203,240; and 2027 $214,700.

Firms can take an energy grant in lieu of the energy production credit or the energy investment credit for facilities whose construction began in 2009, 2010, or 2011. The effect 

of the grant on outlays (in millions of dollars) is as follows: 2017 $1,100; 2018 $50; and $0 thereafter.

Nonbusiness State and local taxes other than on 

owner-occupied homes 

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

25
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

National Defense

1 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 0 0 0 0 0 0 0 0 0 0 0 0

4 Inventory property sales source rules exception 3,320 3,570 3,840 4,170 4,480 4,760 5,070 5,410 5,780 6,180 6,640 49,900

5 107,200 112,560 118,190 124,100 130,310 136,820 143,660 150,850 158,390 166,310 174,620 1,415,810

6 16,080 16,880 17,730 18,620 19,550 20,520 21,550 22,630 23,760 24,950 26,190 212,380

General science, space, and technology: 

7 7,620 7,640 8,420 9,290 10,040 10,700 11,320 11,990 12,710 13,480 14,290 109,880

8 Credit for increasing research activities 10,520 11,160 11,840 12,560 13,330 14,140 15,010 15,940 16,910 17,940 19,020 147,850

Energy: 

9 -470 -210 -20 90 150 190 210 210 220 260 270 1,370

10 Excess of percentage over cost depletion, fuels 350 440 480 510 560 660 790 890 970 1,090 1,210 7,600

11 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 10 10 10 10 40

14 Enhanced oil recovery credit 220 280 320 360 350 370 400 420 410 390 350 3,650

15 Energy production credit 1/ 1,190 1,670 2,150 2,570 2,910 3,210 3,450 3,590 3,640 3,560 3,330 30,080

16 Marginal wells credit 20 30 20 10 10 10 30 40 50 60 70 330

17 Energy investment credit 1/ 1,390 2,560 2,600 2,500 2,500 2,030 1,220 500 60 -90 -110 13,770

18 Alcohol fuel credits 2/ 0 0 0 0 0 0 0 0 0 0 0 0

19 10 0 0 0 0 0 0 0 0 0 0 0

20 190 210 180 120 90 80 60 40 30 10 10 830

21 Exclusion of utility conservation subsidies 30 30 30 30 30 30 30 30 30 30 30 300

22 Credit for holding clean renewable energy bonds 4/ 20 20 20 20 20 20 20 20 20 20 20 200

23 -190 -270 -210 -190 -150 -120 -70 -20 0 0 0 -1,030

24 Credit for investment in clean coal facilities 130 100 90 230 290 170 20 -20 -10 -10 -10 850

25 -1,380 -1,140 -930 -740 -560 -370 -180 -40 0 0 0 -3,960

26 140 150 150 150 120 60 -20 -100 -190 -270 -320 -270

27 50 40 50 50 50 60 50 40 30 30 40 440

28 10 0 -10 -10 -10 -10 -10 -10 -10 -10 -10 -90

29 Credit for construction of new energy efficient homes 50 20 0 0 0 0 0 0 0 0 0 20

30 0 0 0 0 0 0 0 0 0 0 0 0

31 Credit for residential energy efficient property 0 0 0 0 0 0 0 0 0 0 0 0

32 Qualified energy conservation bonds 5/ 10 10 10 10 10 10 10 10 10 10 10 100

33 Advanced Energy Property Credit 40 0 -20 -20 -10 -10 0 0 0 0 0 -60

34 Advanced nuclear power production credit 0 0 170 440 550 550 550 550 550 550 550 4,460

35 Reduced tax rate for nuclear decommissioning funds 210 230 240 260 270 280 290 310 320 340 350 2,890

Natural resources and environment: 

36 40 50 50 50 50 50 50 50 50 50 50 500

37 120 120 130 130 130 130 130 130 120 120 120 1,260

38 130 130 130 120 130 140 140 140 140 150 170 1,390

39 Capital gains treatment of certain timber income 0 0 0 0 0 0 0 0 0 0 0 0

40 Expensing of multiperiod timber growing costs 210 220 220 230 230 240 240 250 250 260 260 2,400

41 Tax incentives for preservation of historic structures 430 440 450 460 470 480 490 500 510 520 530 4,850

42 Industrial CO2 capture and sequestration tax credit 190 200 200 0 0 0 0 0 0 0 0 400

43 10 10 10 20 20 20 20 20 30 30 30 210

Expensing of exploration and development costs, 

fuels 

Total from corporations

Amortize all geological and geophysical expenditures 

over 2 years

Allowance of deduction for certain energy efficient 

commercial building property

Credit for energy efficiency improvements to existing 

homes

Expensing of exploration and development costs, 

nonfuel minerals 

Excess of percentage over cost depletion, nonfuel 

minerals 

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

Deduction for endangered species recovery 

expenditures

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027

(in millions of dollars)

Exclusion of benefits and allowances to armed forces 

personnel 

Exclusion of certain allowances for Federal 

employees abroad

Deferral of income from controlled foreign 

corporations (normal tax method) 

Deferred taxes for financial firms on certain income 

earned overseas

Expensing of research and experimentation 

expenditures (normal tax method) 

Exception from passive loss limitation for working 

interests in oil and gas properties 

Bio-Diesel and small agri-biodiesel producer tax 

credits 3/

Tax credits for clean-fuel burning vehicles and 

refueling property

Deferral of gain from dispositions of transmission 

property to implement FERC restructuring policy

Temporary 50% expensing for equipment used in the 

refining of liquid fuels

Natural gas distribution pipelines treated as 15-year 

property

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

26
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from corporations

Agriculture: 

44 Expensing of certain capital outlays 10 10 10 10 20 20 20 20 20 20 20 170

45 Expensing of certain multiperiod production costs 20 20 20 20 20 20 30 30 30 30 30 250

46 Treatment of loans forgiven for solvent farmers 0 0 0 0 0 0 0 0 0 0 0 0

47 Capital gains treatment of certain income 0 0 0 0 0 0 0 0 0 0 0 0

48 Income averaging for farmers 0 0 0 0 0 0 0 0 0 0 0 0

49 Deferral of gain on sale of farm refiners 20 20 20 20 20 20 20 20 20 30 30 220

50 Expensing of reforestation expenditures 20 20 20 20 20 30 30 30 30 30 30 260

Commerce and housing: 

Financial institutions and insurance: 

51 Exemption of credit union income 2,918 2,901 3,053 3,113 3,246 3,450 3,648 3,839 3,967 4,170 4,372 35,759

52 Exclusion of life insurance death benefits 2,870 2,990 3,130 3,280 3,450 3,620 3,810 4,000 4,200 4,420 4,640 37,540

53 50 50 60 60 60 60 70 70 80 80 80 670

54 720 750 790 840 890 920 950 980 1,000 1,030 1,060 9,210

55 Small life insurance company deduction 30 30 30 30 40 40 40 40 40 40 50 380

56 Exclusion of interest spread of financial institutions 0 0 0 0 0 0 0 0 0 0 0 0

Housing: 

57 350 360 350 340 350 380 380 400 400 420 460 3,840

58 Exclusion of interest on rental housing bonds 320 340 330 320 330 350 350 370 370 390 420 3,570

59 0 0 0 0 0 0 0 0 0 0 0 0

60 0 0 0 0 0 0 0 0 0 0 0 0

61 Deferral of income from installment sales 0 0 0 0 0 0 0 0 0 0 0 0

62 Capital gains exclusion on home sales 0 0 0 0 0 0 0 0 0 0 0 0

63 Exclusion of net imputed rental income 0 0 0 0 0 0 0 0 0 0 0 0

64 0 0 0 0 0 0 0 0 0 0 0 0

65 Credit for low-income housing investments 7,890 7,990 8,510 8,640 8,810 9,010 9,230 9,490 9,760 10,070 10,370 91,880

66 360 470 580 700 840 990 1,120 1,230 1,350 1,460 1,570 10,310

67 Discharge of mortgage indebtedness 0

Commerce: 

68 Discharge of business indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

69 Exceptions from imputed interest rules 0 0 0 0 0 0 0 0 0 0 0 0

70 Treatment of qualified dividends 0 0 0 0 0 0 0 0 0 0 0 0

71 0 0 0 0 0 0 0 0 0 0 0 0

72 Capital gains exclusion of small corporation stock 0 0 0 0 0 0 0 0 0 0 0 0

73 Step-up basis of capital gains at death 0 0 0 0 0 0 0 0 0 0 0 0

74 Carryover basis of capital gains on gifts 0 0 0 0 0 0 0 0 0 0 0 0

75 0 0 0 0 0 0 0 0 0 0 0 0

76 Deferral of gains from like-kind exchanges 6,000 6,310 6,630 6,960 7,300 7,670 8,050 8,460 8,880 9,320 9,750 79,330

77 -3,860 -3,960 -4,150 -4,400 -4,660 -4,920 -5,190 -5,480 -5,670 -5,820 -6,020 -50,270

78 28,810 24,120 17,490 -3,510 -3,390 5,540 11,460 16,960 21,650 25,380 28,500 144,200

79 290 280 290 1,040 1,120 890 790 730 700 710 710 7,260

80 1,550 1,510 1,440 1,430 1,350 1,330 1,280 1,250 1,180 1,180 1,150 13,100

81 Exclusion of interest on small issue bonds 40 50 40 40 50 50 50 50 50 50 60 490

82 Deduction for US production activities 9,930 10,400 10,870 11,390 11,960 12,550 13,180 13,840 14,530 15,260 16,020 130,000

83 Special rules for certain film and TV production 160 90 50 20 0 0 0 0 0 0 0 160

Transportation: 

84 Tonnage tax 80 80 90 90 90 100 100 110 110 120 130 1,020

85 Deferral of tax on shipping companies 20 20 20 20 20 20 20 20 20 20 20 200

86 Exclusion of reimbursed employee parking expenses 0 0 0 0 0 0 0 0 0 0 0 0

87 Exclusion for employer-provided transit passes 0 0 0 0 0 0 0 0 0 0 0 0

88 50 0 0 0 0 0 0 0 0 0 0 0

89 50 50 40 40 40 40 30 30 30 30 30 360

Exemption or special alternative tax for small property 

and casualty insurance companies 

Tax exemption of insurance income earned by taxexempt organizations

Exclusion of interest on owner-occupied mortgage 

subsidy bonds 

Deductibility of mortgage interest on owner-occupied 

homes 

Deductibility of State and local property tax on owneroccupied homes 

Exception from passive loss rules for $25,000 of 

rental loss 

Accelerated depreciation on rental housing (normal 

tax method) 

Capital gains (except agriculture, timber, iron ore, and 

coal)

Ordinary income treatment of loss from small 

business corporation stock sale 

Depreciation of buildings other than rental housing 

(normal tax method) 

Accelerated depreciation of machinery and equipment 

(normal tax method) 

Expensing of certain small investments (normal tax 

method) 

Graduated corporation income tax rate (normal tax 

method) 

Tax credit for certain expenditures for maintaining 

railroad tracks

Exclusion of interest on bonds for Highway Projects 

and rail-truck transfer facilities

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

27
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from corporations

Community and regional development: 

90 10 10 10 10 10 10 10 10 10 10 10 100

91 200 210 200 200 210 220 220 230 230 250 270 2,240

92 150 150 150 160 160 160 170 170 180 180 190 1,670

93 Empowerment zones 50 20 10 10 0 0 0 0 0 0 0 40

94 New markets tax credit 1,430 1,380 1,290 1,250 1,180 1,070 860 550 280 70 -120 7,810

95 Credit to holders of Gulf Tax Credit Bonds. 70 70 70 70 70 70 70 70 70 70 70 700

96 Recovery Zone Bonds 6/ 40 40 40 40 40 40 40 40 40 40 40 400

97 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 10 100

Education, training, employment, and social services: 

Education: 

98 0 0 0 0 0 0 0 0 0 0 0 0

99 0 0 0 0 0 0 0 0 0 0 0 0

100 Education Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

101 Deductibility of student-loan interest 0 0 0 0 0 0 0 0 0 0 0 0

102 Qualified tuition programs 0 0 0 0 0 0 0 0 0 0 0 0

103 Exclusion of interest on student-loan bonds 110 120 110 110 110 120 120 130 130 140 150 1,240

104 690 710 690 670 690 740 740 780 780 830 900 7,530

105 Credit for holders of zone academy bonds 8/ 170 180 170 150 130 110 90 80 60 50 50 1,070

106 0 0 0 0 0 0 0 0 0 0 0 0

107 0 0 0 0 0 0 0 0 0 0 0 0

108 Deductibility of charitable contributions (education) 860 900 950 1,000 1,040 1,100 1,150 1,210 1,270 1,330 1,390 11,340

109 0 0 0 0 0 0 0 0 0 0 0 0

110 Special deduction for teacher expenses 0 0 0 0 0 0 0 0 0 0 0 0

111 Discharge of student loan indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

112 Qualified school construction bonds 9/ 160 160 160 160 160 160 160 160 160 160 160 1,600

Training, employment, and social services: 

113 Work opportunity tax credit 1,000 1,020 1,050 730 380 250 190 150 110 80 60 4,020

114 Employer provided child care exclusion 0 0 0 0 0 0 0 0 0 0 0 0

115 Employer-provided child care credit 10 10 10 10 10 10 10 10 10 10 10 100

116 Assistance for adopted foster children 0 0 0 0 0 0 0 0 0 0 0 0

117 Adoption credit and exclusion 0 0 0 0 0 0 0 0 0 0 0 0

118 0 0 0 0 0 0 0 0 0 0 0 0

119 Credit for child and dependent care expenses 0 0 0 0 0 0 0 0 0 0 0 0

120 Credit for disabled access expenditures 0 0 0 0 0 0 0 0 0 0 0 0

121 1,800 1,900 1,930 2,010 2,090 2,170 2,250 2,340 2,430 2,530 2,630 22,280

122 Exclusion of certain foster care payments 0 0 0 0 0 0 0 0 0 0 0 0

123 Exclusion of parsonage allowances 0 0 0 0 0 0 0 0 0 0 0 0

124 Indian employment credit 20 10 10 10 10 0 0 0 0 0 0 40

125 Credit for employer differential wage payments 0 0 10 10 10 10 10 10 10 10 10 90

Health: 

126 0 0 0 0 0 0 0 0 0 0 0 0

127 Self-employed medical insurance premiums 0 0 0 0 0 0 0 0 0 0 0 0

128 Medical Savings Accounts / Health Savings Accounts 0 0 0 0 0 0 0 0 0 0 0 0

129 Deductibility of medical expenses 0 0 0 0 0 0 0 0 0 0 0 0

130 Exclusion of interest on hospital construction bonds 1,030 1,070 1,040 1,010 1,040 1,110 1,120 1,170 1,170 1,240 1,350 11,320

131 Refundable Premium Assistance Tax Credit 11/ 0 0 0 0 0 0 0 0 0 0 0 0

132 10 10 10 10 0 0 0 0 0 0 0 30

133 Deductibility of charitable contributions (health) 0 0 0 0 0 0 0 0 0 0 0 0

134 Tax credit for orphan drug research 2,240 2,710 3,280 3,960 4,790 5,800 7,020 8,490 10,280 12,440 15,060 73,830

135 Special Blue Cross/Blue Shield tax benefits 590 610 630 670 700 740 780 820 870 910 960 7,690

136 0 0 0 0 0 0 0 0 0 0 0 0

137 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of employer-provided educational 

assistance 

Exclusion of interest for airport, dock, and similar 

bonds

Exemption of certain mutuals' and cooperatives' 

income 

Investment credit for rehabilitation of structures (other 

than historic) 

Exclusion of scholarship and fellowship income 

(normal tax method) 

Tax credits and deductions for postsecondary 

education expenses 7/

Exclusion of interest on bonds for private nonprofit 

educational facilities 

Exclusion of interest on savings bonds redeemed to 

finance educational expenses

Parental personal exemption for students age 19 or 

over 

Exclusion of employee meals and lodging (other than 

military) 

Deductibility of charitable contributions, other than 

education and health

Exclusion of employer contributions for medical 

insurance premiums and medical care 10/

Credit for employee health insurance expenses of 

small business 12/

Tax credit for health insurance purchased by certain 

displaced and retired individuals 13/

Distributions from retirement plans for premiums for 

health and long-term care insurance

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

28
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from corporations

Income security: 

138 Child credit 14/ 0 0 0 0 0 0 0 0 0 0 0 0

139 0 0 0 0 0 0 0 0 0 0 0 0

140 Exclusion of workers' compensation benefits 0 0 0 0 0 0 0 0 0 0 0 0

141 0 0 0 0 0 0 0 0 0 0 0 0

142 Exclusion of special benefits for disabled coal miners 0 0 0 0 0 0 0 0 0 0 0 0

143 Exclusion of military disability pensions 0 0 0 0 0 0 0 0 0 0 0 0

Net exclusion of pension contributions and earnings: 

144 Defined benefit employer plans 0 0 0 0 0 0 0 0 0 0 0 0

145 Defined contribution employer plans 0 0 0 0 0 0 0 0 0 0 0 0

146 Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

147 Low and moderate income savers credit 0 0 0 0 0 0 0 0 0 0 0 0

148 Self-Employed plans 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of other employee benefits: 

149 Premiums on group term life insurance 0 0 0 0 0 0 0 0 0 0 0 0

150 Premiums on accident and disability insurance 0 0 0 0 0 0 0 0 0 0 0 0

151 0 0 0 0 0 0 0 0 0 0 0 0

152 0 0 0 0 0 0 0 0 0 0 0 0

153 Special ESOP rules 1,960 2,020 2,080 2,150 2,220 2,290 2,360 2,430 2,510 2,580 2,660 23,300

154 Additional deduction for the blind 0 0 0 0 0 0 0 0 0 0 0 0

155 Additional deduction for the elderly 0 0 0 0 0 0 0 0 0 0 0 0

156 Tax credit for the elderly and disabled 0 0 0 0 0 0 0 0 0 0 0 0

157 Deductibility of casualty losses 0 0 0 0 0 0 0 0 0 0 0 0

158 Earned income tax credit 15/ 0 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 

159 0 0 0 0 0 0 0 0 0 0 0 0

160 490 510 530 560 590 620 650 680 720 750 790 6,400

Veterans benefits and services: 

161 0 0 0 0 0 0 0 0 0 0 0 0

162 Exclusion of veterans pensions 0 0 0 0 0 0 0 0 0 0 0 0

163 Exclusion of GI bill benefits 0 0 0 0 0 0 0 0 0 0 0 0

164 Exclusion of interest on veterans housing bonds 0 0 0 0 0 0 0 10 10 10 10 40

General purpose fiscal assistance: 

165 8,710 9,020 8,740 8,530 8,800 9,410 9,450 9,900 9,900 10,510 11,370 95,630

166 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

167 0 0 0 0 0 0 0 0 0 0 0 0

Interest: 

168 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: 

Public purposes 8,710 9,020 8,740 8,530 8,800 9,410 9,450 9,900 9,900 10,510 11,370 95,630

Energy facilities 0 0 0 0 0 0 0 10 10 10 10 40

130 130 130 120 130 140 140 140 140 150 170 1,390

Small-issues 40 50 40 40 50 50 50 50 50 50 60 490

Owner-occupied mortgage subsidies 350 360 350 340 350 380 380 400 400 420 460 3,840

Rental housing 320 340 330 320 330 350 350 370 370 390 420 3,570

Airports, docks, and similar facilities 200 210 200 200 210 220 220 230 230 250 270 2,240

Student loans 110 120 110 110 110 120 120 130 130 140 150 1,240

Private nonprofit educational facilities 690 710 690 670 690 740 740 780 780 830 900 7,530

Hospital construction 1,030 1,070 1,040 1,010 1,040 1,110 1,120 1,170 1,170 1,240 1,350 11,320

Veterans' housing 0 0 0 0 0 0 0 10 10 10 10 40

Nonbusiness State and local taxes other than on 

owner-occupied homes 

See Table 1 footnotes for specific table information

Water, sewage, and hazardous waste disposal 

facilities 

Credit for certain employer contributions to social 

security

Exclusion of veterans death benefits and disability 

compensation 

Exclusion of interest on public purpose State and 

local bonds

Deductibility of nonbusiness State and local taxes 

other than on owner-occupied homes 

Exclusion of railroad retirement (Social Security 

equivalent) benefits 

Exclusion of public assistance benefits (normal tax 

method) 

Income of trusts to finance supplementary 

unemployment benefits 

Income of trusts to finance voluntary employee 

benefits associations 

Social Security benefits for retired and disabled 

workers and spouses, dependents and survivors

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

29
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

National Defense

1 12,400 12,830 11,640 11,680 12,040 12,520 13,040 13,590 14,190 14,820 15,490 131,840

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,600 6,930 7,280 7,640 8,020 8,420 8,840 9,290 9,750 10,240 10,750 87,160

3 1,370 1,430 1,510 1,580 1,660 1,740 1,830 1,920 2,020 2,120 2,230 18,040

4 Inventory property sales source rules exception 0 0 0 0 0 0 0 0 0 0 0 0

5 0 0 0 0 0 0 0 0 0 0 0 0

6 0 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 710 700 720 810 870 940 990 1,050 1,110 1,180 1,250 9,620

8 Credit for increasing research activities 980 1,090 1,170 1,260 1,350 1,460 1,570 1,690 1,820 1,960 2,120 15,490

Energy: 

9 -180 -80 -10 30 50 70 80 80 80 90 100 490

10 Excess of percentage over cost depletion, fuels 90 110 120 130 140 170 200 220 240 270 300 1,900

11 20 20 20 20 20 30 30 30 30 30 30 260

12 Capital gains treatment of royalties on coal 140 160 150 140 150 150 160 160 170 180 190 1,610

13 Exclusion of interest on energy facility bonds 10 10 10 10 10 10 10 20 20 20 20 140

14 Enhanced oil recovery credit 50 70 80 90 90 90 100 110 100 100 90 920

15 Energy production credit 1/ 400 560 720 860 970 1,070 1,150 1,200 1,210 1,190 1,110 10,040

16 Marginal wells credit 50 80 50 20 20 30 70 100 130 150 160 810

17 Energy investment credit 1/ 460 850 870 830 830 680 410 170 20 -30 -40 4,590

18 Alcohol fuel credits 2/ 20 0 0 0 0 0 0 0 0 0 0 0

19 30 0 0 0 0 0 0 0 0 0 0 0

20 400 470 490 370 270 250 220 200 150 120 90 2,630

21 Exclusion of utility conservation subsidies 440 460 490 510 540 560 590 620 650 680 720 5,820

22 Credit for holding clean renewable energy bonds 4/ 50 50 50 50 50 50 50 50 50 50 50 500

23 0 0 0 0 0 0 0 0 0 0 0 0

24 Credit for investment in clean coal facilities 10 10 10 20 30 20 0 0 0 0 0 90

25 0 0 0 0 0 0 0 0 0 0 0 0

26 0 0 0 0 0 0 0 0 0 0 0 0

27 20 20 20 20 20 20 20 20 10 10 10 170

28 20 -10 -20 -20 -20 -20 -20 -20 -20 -20 -20 -190

29 Credit for construction of new energy efficient homes 120 50 10 0 0 0 0 0 0 0 0 60

30 290 0 0 0 0 0 0 0 0 0 0 0

31 Credit for residential energy efficient property 1,430 1,380 1,360 1,250 1,060 530 120 20 0 0 0 5,720

32 Qualified energy conservation bonds 5/ 20 20 20 20 20 20 20 20 20 20 20 200

33 Advanced Energy Property Credit 10 0 0 0 0 0 0 0 0 0 0 0

34 Advanced nuclear power production credit 0 0 0 0 0 0 0 0 0 0 0 0

35 Reduced tax rate for nuclear decommissioning funds 0 0 0 0 0 0 0 0 0 0 0 0

Natural resources and environment: 

36 0 0 0 0 0 0 0 0 0 0 0 0

37 20 20 20 20 20 20 20 20 20 20 20 200

38 290 280 290 300 320 360 400 440 470 500 510 3,870

39 Capital gains treatment of certain timber income 140 160 150 140 150 150 160 160 170 180 190 1,610

40 Expensing of multiperiod timber growing costs 130 130 130 130 140 160 160 160 160 160 160 1,490

41 Tax incentives for preservation of historic structures 70 70 70 70 70 70 70 70 80 80 80 730

42 Industrial CO2 capture and sequestration tax credit 0 0 0 0 0 0 0 0 0 0 0 0

43 20 20 20 20 30 30 30 30 40 40 50 310

Expensing of exploration and development costs, 

fuels 

Total from individuals

Deferred taxes for financial firms on certain income 

earned overseas

Expensing of research and experimentation 

expenditures (normal tax method) 

Exception from passive loss limitation for working 

interests in oil and gas properties 

Bio-Diesel and small agri-biodiesel producer tax 

credits 3/

Tax credits for clean-fuel burning vehicles and 

refueling property

Deferral of gain from dispositions of transmission 

property to implement FERC restructuring policy

Temporary 50% expensing for equipment used in the 

refining of liquid fuels

Natural gas distribution pipelines treated as 15-year 

property

Amortize all geological and geophysical expenditures 

over 2 years

Allowance of deduction for certain energy efficient 

commercial building property

Credit for energy efficiency improvements to existing 

homes

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027

(in millions of dollars)

Exclusion of benefits and allowances to armed forces 

personnel 

Exclusion of certain allowances for Federal 

employees abroad

Deferral of income from controlled foreign 

corporations (normal tax method) 

Expensing of exploration and development costs, 

nonfuel minerals 

Excess of percentage over cost depletion, nonfuel 

minerals 

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

Deduction for endangered species recovery 

expenditures

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

30
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from individuals

Agriculture: 

44 Expensing of certain capital outlays 180 190 200 210 220 230 240 250 260 270 280 2,350

45 Expensing of certain multiperiod production costs 290 300 310 320 330 350 360 380 390 410 420 3,570

46 Treatment of loans forgiven for solvent farmers 40 50 50 50 50 50 60 60 60 60 70 560

47 Capital gains treatment of certain income 1,360 1,550 1,470 1,450 1,480 1,520 1,580 1,640 1,720 1,800 1,890 16,100

48 Income averaging for farmers 140 150 160 170 180 180 190 200 210 220 230 1,890

49 Deferral of gain on sale of farm refiners 0 0 0 0 0 0 0 0 0 0 0 0

50 Expensing of reforestation expenditures 40 30 40 40 40 40 40 50 50 50 50 430

Commerce and housing: 

Financial institutions and insurance: 

51 Exemption of credit union income 0 0 0 0 0 0 0 0 0 0 0 0

52 Exclusion of life insurance death benefits 11,880 12,460 13,160 13,930 15,050 16,190 17,160 18,070 19,020 20,000 20,920 165,960

53 0 0 0 0 0 0 0 0 0 0 0 0

54 0 0 0 0 0 0 0 0 0 0 0 0

55 Small life insurance company deduction 0 0 0 0 0 0 0 0 0 0 0 0

56 Exclusion of interest spread of financial institutions 160 240 280 290 300 310 320 330 340 350 360 3,120

Housing: 

57 800 760 800 820 880 980 1,110 1,220 1,310 1,370 1,400 10,650

58 Exclusion of interest on rental housing bonds 740 700 740 760 810 910 1,020 1,120 1,210 1,260 1,290 9,820

59 65,600 69,130 74,510 81,330 89,030 96,840 104,490 111,810 118,900 125,560 131,630 1,003,230

60 33,710 35,790 38,190 40,920 43,750 46,600 49,550 52,700 55,940 59,230 62,680 485,350

61 Deferral of income from installment sales 1,590 1,760 1,700 1,690 1,730 1,770 1,830 1,900 1,970 2,050 2,140 18,540

62 Capital gains exclusion on home sales 43,220 43,870 44,550 45,380 46,160 46,870 47,710 48,630 49,500 50,370 51,280 474,320

63 Exclusion of net imputed rental income 121,350 126,000 131,110 136,680 142,590 148,830 155,330 162,180 169,480 177,100 185,370 1,534,670

64 7,410 7,710 8,060 8,390 8,730 9,080 9,440 9,750 10,100 10,490 10,860 92,610

65 Credit for low-income housing investments 420 420 450 450 460 470 490 500 510 530 550 4,830

66 1,730 2,210 2,930 3,670 4,210 4,870 5,540 6,180 6,780 7,350 7,900 51,640

67 Discharge of mortgage indebtedness 310 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

68 Discharge of business indebtedness -70 0 10 0 10 30 40 40 40 40 50 260

69 Exceptions from imputed interest rules 60 60 60 70 70 80 80 80 90 90 100 780

70 Treatment of qualified dividends 27,550 29,130 30,700 32,460 34,420 36,580 38,940 41,500 44,310 47,290 50,440 385,770

71 101,510 115,910 109,880 107,970 110,230 113,500 117,650 122,620 128,280 134,450 141,100 1,201,590

72 Capital gains exclusion of small corporation stock 790 1,020 1,240 1,400 1,520 1,630 1,730 1,830 1,900 1,980 2,050 16,300

73 Step-up basis of capital gains at death 37,910 38,710 39,560 40,160 40,560 41,240 41,860 42,620 43,230 43,820 44,540 416,300

74 Carryover basis of capital gains on gifts 5,190 4,840 4,670 4,560 4,530 4,530 4,560 4,640 4,700 4,730 4,780 46,540

75 70 80 80 80 80 80 90 90 90 100 100 870

76 Deferral of gains from like-kind exchanges 1,690 1,770 1,870 1,960 2,060 2,160 2,270 2,380 2,500 2,620 2,740 22,330

77 -4,940 -5,010 -5,420 -5,850 -6,110 -6,440 -6,800 -7,210 -7,460 -7,690 -7,960 -65,950

78 15,490 12,620 8,890 -5,800 -6,160 -440 3,270 6,630 9,470 11,670 13,550 53,700

79 3,120 3,120 3,420 6,500 6,790 6,080 5,950 5,970 6,070 6,310 6,520 56,730

80 0 0 0 0 0 0 0 0 0 0 0 0

81 Exclusion of interest on small issue bonds 100 100 100 100 110 130 140 150 170 170 180 1,350

82 Deduction for US production activities 3,590 3,750 3,920 4,110 4,320 4,540 4,770 5,010 5,260 5,530 5,810 47,020

83 Special rules for certain film and TV production 40 20 10 10 0 0 0 0 0 0 0 40

Transportation: 

84 Tonnage tax 0 0 0 0 0 0 0 0 0 0 0 0

85 Deferral of tax on shipping companies 0 0 0 0 0 0 0 0 0 0 0 0

86 Exclusion of reimbursed employee parking expenses 3,202 3,319 3,452 3,582 3,731 3,862 3,971 4,117 4,257 4,404 4,571 39,266

87 Exclusion for employer-provided transit passes 1,123 1,192 1,270 1,355 1,446 1,532 1,613 1,719 1,819 1,934 2,054 15,934

88 10 0 0 0 0 0 0 0 0 0 0 0

89 150 140 130 130 120 120 110 110 100 100 90 1,150

Exclusion of interest on owner-occupied mortgage 

subsidy bonds 

Deductibility of mortgage interest on owner-occupied 

homes 

Deductibility of State and local property tax on owneroccupied homes 

Exception from passive loss rules for $25,000 of 

rental loss 

Exemption or special alternative tax for small property 

and casualty insurance companies 

Tax exemption of insurance income earned by taxexempt organizations

Accelerated depreciation on rental housing (normal 

tax method) 

Capital gains (except agriculture, timber, iron ore, and 

coal)

Ordinary income treatment of loss from small 

business corporation stock sale 

Depreciation of buildings other than rental housing 

(normal tax method) 

Accelerated depreciation of machinery and equipment 

(normal tax method) 

Expensing of certain small investments (normal tax 

method) 

Graduated corporation income tax rate (normal tax 

method) 

Tax credit for certain expenditures for maintaining 

railroad tracks

Exclusion of interest on bonds for Highway Projects 

and rail-truck transfer facilities

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

31
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from individuals

Community and regional development: 

90 10 10 10 10 10 10 10 10 10 10 10 100

91 460 440 460 480 510 570 640 700 760 790 810 6,160

92 0 0 0 0 0 0 0 0 0 0 0 0

93 Empowerment zones 60 30 20 20 10 10 10 0 0 0 0 100

94 New markets tax credit 30 30 30 30 30 20 20 20 10 10 0 200

95 Credit to holders of Gulf Tax Credit Bonds. 170 180 200 230 250 280 310 330 350 360 370 2,860

96 Recovery Zone Bonds 6/ 90 100 110 120 140 150 170 180 190 200 210 1,570

97 Tribal Economic Development Bonds 30 30 30 40 40 50 50 60 60 60 70 490

Education, training, employment, and social services: 

Education: 

98 3,300 3,410 3,490 3,650 3,800 3,970 4,140 4,310 4,500 4,690 4,890 40,850

99 16,460 16,360 16,320 16,310 16,290 16,190 16,180 16,170 16,120 16,020 15,980 161,940

100 Education Individual Retirement Accounts 30 30 40 40 40 40 40 40 30 30 30 360

101 Deductibility of student-loan interest 2,340 2,360 2,390 2,500 2,510 2,520 2,610 2,610 2,630 2,650 2,670 25,450

102 Qualified tuition programs 1,950 2,140 2,330 2,530 2,730 2,940 3,150 3,380 3,600 3,830 4,070 30,700

103 Exclusion of interest on student-loan bonds 260 250 260 270 290 320 360 390 420 440 450 3,450

104 1,560 1,490 1,570 1,610 1,720 1,920 2,160 2,380 2,550 2,680 2,740 20,820

105 Credit for holders of zone academy bonds 8/ 0 0 0 0 0 0 0 0 0 0 0 0

106 30 30 30 30 40 40 40 40 50 50 50 400

107 9,600 9,500 9,490 9,500 9,540 9,590 9,630 9,670 9,700 9,770 9,940 96,330

108 Deductibility of charitable contributions (education) 4,620 4,990 5,380 5,730 6,060 6,390 6,710 7,040 7,360 7,670 7,980 65,310

109 900 940 990 1,040 1,100 1,150 1,210 1,270 1,340 1,400 1,480 11,920

110 Special deduction for teacher expenses 200 210 200 210 250 250 250 260 260 260 270 2,420

111 Discharge of student loan indebtedness 100 100 100 110 110 110 110 120 120 120 120 1,120

112 Qualified school construction bonds 9/ 490 490 490 490 490 490 490 490 490 490 490 4,900

Training, employment, and social services: 

113 Work opportunity tax credit 320 320 320 260 110 60 40 30 20 20 10 1,190

114 Employer provided child care exclusion 900 900 940 970 1,000 1,030 1,060 1,100 1,140 1,180 1,220 10,540

115 Employer-provided child care credit 0 0 0 0 0 0 0 0 0 0 0 0

116 Assistance for adopted foster children 590 620 660 690 730 780 820 860 910 950 1,000 8,020

117 Adoption credit and exclusion 620 620 650 620 640 690 690 710 690 710 720 6,740

118 4,830 4,990 5,150 5,290 5,440 5,590 5,750 5,910 6,060 6,220 6,380 56,780

119 Credit for child and dependent care expenses 4,600 4,690 4,790 4,890 4,960 5,060 5,140 5,220 5,300 5,370 5,440 50,860

120 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

121 45,960 49,820 53,100 56,580 59,840 63,080 66,260 69,480 72,660 75,740 79,240 645,800

122 Exclusion of certain foster care payments 490 510 530 550 570 590 610 620 640 660 680 5,960

123 Exclusion of parsonage allowances 920 970 1,021 1,075 1,132 1,192 1,255 1,322 1,392 1,465 1,543 12,367

124 Indian employment credit 20 10 10 10 10 10 10 10 10 10 10 100

125 Credit for employer differential wage payments 0 0 0 0 0 10 10 10 10 10 10 60

Health: 

126 214,280 227,880 242,880 257,390 273,180 291,180 309,500 328,620 349,300 370,360 393,430 3,043,720

127 Self-employed medical insurance premiums 8,140 8,170 7,750 8,010 8,460 8,830 9,220 9,640 10,110 10,610 11,170 91,970

128 Medical Savings Accounts / Health Savings Accounts 8,240 9,400 10,650 11,730 12,750 13,820 14,830 15,770 16,720 17,700 18,730 142,100

129 Deductibility of medical expenses 9,720 10,030 10,870 11,850 12,840 13,790 14,790 15,830 16,910 18,090 19,400 144,400

130 Exclusion of interest on hospital construction bonds 2,350 2,240 2,360 2,420 2,590 2,890 3,250 3,570 3,840 4,020 4,120 31,300

131 Refundable Premium Assistance Tax Credit 11/ 5,630 6,310 7,100 7,740 8,380 8,910 9,370 10,040 10,590 11,390 12,140 91,970

132 80 70 60 40 30 20 10 10 10 10 10 270

133 Deductibility of charitable contributions (health) 5,120 5,530 5,960 6,350 6,710 7,080 7,430 7,790 8,150 8,500 8,860 72,360

134 Tax credit for orphan drug research 40 50 60 70 90 100 120 140 170 190 230 1,220

135 Special Blue Cross/Blue Shield tax benefits 0 0 0 0 0 0 0 0 0 0 0 0

136 30 20 10 0 0 0 0 0 0 0 0 30

137 460 480 500 520 540 560 580 600 620 650 670 5,720

Investment credit for rehabilitation of structures (other 

than historic) 

Distributions from retirement plans for premiums for 

health and long-term care insurance

Exclusion of employer-provided educational 

assistance 

Exclusion of interest for airport, dock, and similar 

bonds

Exemption of certain mutuals' and cooperatives' 

income 

Exclusion of employee meals and lodging (other than 

military) 

Deductibility of charitable contributions, other than 

education and health

Exclusion of employer contributions for medical 

insurance premiums and medical care 10/

Credit for employee health insurance expenses of 

small business 12/

Tax credit for health insurance purchased by certain 

displaced and retired individuals 13/

Exclusion of scholarship and fellowship income 

(normal tax method) 

Tax credits and deductions for postsecondary 

education expenses 7/

Exclusion of interest on bonds for private nonprofit 

educational facilities 

Exclusion of interest on savings bonds redeemed to 

finance educational expenses

Parental personal exemption for students age 19 or 

over 

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

32
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-27

Total from individuals

Income security: 

138 Child credit 14/ 24,340 24,270 23,960 23,580 23,140 22,690 22,270 21,860 21,410 20,980 20,610 224,770

139 290 280 280 270 260 250 240 220 210 190 170 2,370

140 Exclusion of workers' compensation benefits 9,970 10,040 10,110 10,180 10,250 10,320 10,390 10,470 10,540 10,610 10,690 103,600

141 590 600 620 640 670 680 700 730 740 750 660 6,790

142 Exclusion of special benefits for disabled coal miners 20 20 20 20 20 10 10 10 10 10 10 140

143 Exclusion of military disability pensions 170 180 180 190 190 200 200 210 210 220 220 2,000

Net exclusion of pension contributions and earnings: 0 0 0 0 0 0 0 0 0 0 0 0

144 Defined benefit employer plans 76,091 76,998 77,341 78,453 77,081 75,678 73,516 71,376 68,657 65,592 61,673 726,365

145 Defined contribution employer plans 69,440 71,270 80,480 87,010 89,310 95,400 112,200 122,030 126,140 130,240 137,820 1,051,900

146 Individual Retirement Accounts 17,320 19,110 20,630 22,180 23,790 25,460 27,100 28,150 29,080 29,880 30,640 256,020

147 Low and moderate income savers credit 1,440 1,470 1,470 1,460 1,440 1,440 1,440 1,440 1,420 1,450 1,430 14,460

148 Self-Employed plans 28,460 26,980 30,010 33,390 36,930 40,280 44,000 48,070 52,400 57,060 62,170 431,290

Exclusion of other employee benefits: 0 0 0 0 0 0 0 0 0 0 0 0

149 Premiums on group term life insurance 3,350 3,140 3,250 3,370 3,500 3,630 3,770 3,910 4,070 4,230 4,390 37,260

150 Premiums on accident and disability insurance 330 330 330 330 340 340 340 350 350 350 350 3,410

151 20 30 40 40 50 50 50 50 60 60 60 490

152 1,180 1,240 1,290 1,350 1,420 1,480 1,550 1,630 1,710 1,780 1,860 15,310

153 Special ESOP rules 120 120 130 130 140 140 150 150 150 160 160 1,430

154 Additional deduction for the blind 30 30 30 30 40 40 40 50 50 60 60 430

155 Additional deduction for the elderly 3,470 3,770 4,050 4,380 4,780 5,090 5,470 5,850 6,290 6,810 7,380 53,870

156 Tax credit for the elderly and disabled 10 10 10 0 0 0 0 0 0 0 0 20

157 Deductibility of casualty losses 330 350 380 400 430 460 500 530 560 590 630 4,830

158 Earned income tax credit 15/ 1,760 1,810 3,960 4,100 2,060 2,150 2,250 2,370 2,500 2,570 2,700 26,470

Social Security: 

Exclusion of social security benefits: 

159 34,500 36,110 37,660 39,430 41,430 43,840 46,830 48,780 50,130 53,690 57,850 455,750

160 550 570 600 630 660 690 730 760 800 840 890 7,170

Veterans benefits and services: 

161 7,920 8,620 9,190 9,560 9,910 10,290 10,680 11,090 11,520 11,960 12,440 105,260

162 Exclusion of veterans pensions 480 510 540 560 580 610 630 660 690 720 750 6,250

163 Exclusion of GI bill benefits 1,740 1,830 1,910 2,010 2,110 2,220 2,330 2,440 2,570 2,700 2,840 22,960

164 Exclusion of interest on veterans housing bonds 10 10 10 10 10 10 10 20 20 20 20 140

General purpose fiscal assistance: 

165 19,850 18,900 19,910 20,420 21,880 24,420 27,430 30,160 32,390 33,960 34,790 264,260

166 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

167 70,420 74,980 80,190 86,220 91,900 97,460 103,350 109,610 116,020 122,310 128,980 1,011,020

Interest: 

168 Deferral of interest on U.S. savings bonds 960 950 940 930 930 920 910 900 890 880 890 9,140

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 33,710 35,790 38,190 40,920 43,750 46,600 49,550 52,700 55,940 59,230 62,680 485,350

70,420 74,980 80,190 86,220 91,900 97,460 103,350 109,610 116,020 122,310 128,980 1,011,020

Exclusion of interest on State and local bonds for: 

Public purposes 19,850 18,900 19,910 20,420 21,880 24,420 27,430 30,160 32,390 33,960 34,790 264,260

Energy facilities 10 10 10 10 10 10 10 20 20 20 20 140

290 280 290 300 320 360 400 440 470 500 510 3,870

Small-issues 100 100 100 100 110 130 140 150 170 170 180 1,350

Owner-occupied mortgage subsidies 800 760 800 820 880 980 1,110 1,220 1,310 1,370 1,400 10,650

Rental housing 740 700 740 760 810 910 1,020 1,120 1,210 1,260 1,290 9,820

Airports, docks, and similar facilities 460 440 460 480 510 570 640 700 760 790 810 6,160

Student loans 260 250 260 270 290 320 360 390 420 440 450 3,450

Private nonprofit educational facilities 1,560 1,490 1,570 1,610 1,720 1,920 2,160 2,380 2,550 2,680 2,740 20,820

Hospital construction 2,350 2,240 2,360 2,420 2,590 2,890 3,250 3,570 3,840 4,020 4,120 31,300

Veterans' housing 10 10 10 10 10 10 10 20 20 20 20 140

See Table 1 footnotes for specific table information

Water, sewage, and hazardous waste disposal 

facilities 

Nonbusiness State and local taxes other than on 

owner-occupied homes 

Exclusion of veterans death benefits and disability 

compensation 

Exclusion of interest on public purpose State and 

local bonds

Deductibility of nonbusiness State and local taxes 

other than on owner-occupied homes 

Exclusion of railroad retirement (Social Security 

equivalent) benefits 

Exclusion of public assistance benefits (normal tax 

method) 

Income of trusts to finance supplementary 

unemployment benefits 

Income of trusts to finance voluntary employee 

benefits associations 

Social Security benefits for retired and disabled 

workers and spouses, dependents and survivors

Credit for certain employer contributions to social 

security

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

33
(in millions of dollars)

Provision 2018 2019 2018-27

126 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 227,880 242,880 3,043,720

63 Exclusion of net imputed rental income 126,000 131,110 1,534,670

5 Deferral of income from controlled foreign corporations (normal tax method) 112,560 118,190 1,415,810

71 Capital gains (except agriculture, timber, iron ore, and coal) 115,910 109,880 1,201,590

145 Defined contribution employer plans 71,270 80,480 1,051,900

167 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 74,980 80,190 1,011,020

59 Deductibility of mortgage interest on owner-occupied homes 69,130 74,510 1,003,230

144 Defined benefit employer plans 76,998 77,341 726,365

121 Deductibility of charitable contributions, other than education and health 51,720 55,030 668,080

60 Deductibility of State and local property tax on owner-occupied homes 35,790 38,190 485,350

62 Capital gains exclusion on home sales 43,870 44,550 474,320

159 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 36,110 37,660 455,750

148 Self-Employed plans 26,980 30,010 431,290

73 Step-up basis of capital gains at death 38,710 39,560 416,300

70 Treatment of qualified dividends 29,130 30,700 385,770

165 Exclusion of interest on public purpose State and local bonds 27,920 28,650 359,890

146 Individual Retirement Accounts 19,110 20,630 256,020

138 Child credit 14/ 24,270 23,960 224,770

6 Deferred taxes for financial firms on certain income earned overseas 16,880 17,730 212,380

52 Exclusion of life insurance death benefits 15,450 16,290 203,500

78 Accelerated depreciation of machinery and equipment (normal tax method) 36,740 26,380 197,900

82 Deduction for US production activities 14,150 14,790 177,020

8 Credit for increasing research activities 12,250 13,010 163,340

99 Tax credits and deductions for postsecondary education expenses 7/ 16,360 16,320 161,940

129 Deductibility of medical expenses 10,030 10,870 144,400

128 Medical Savings Accounts / Health Savings Accounts 9,400 10,650 142,100

1 Exclusion of benefits and allowances to armed forces personnel 12,830 11,640 131,840

7 Expensing of research and experimentation expenditures (normal tax method) 8,340 9,140 119,500

161 Exclusion of veterans death benefits and disability compensation 8,620 9,190 105,260

140 Exclusion of workers' compensation benefits 10,040 10,110 103,600

76 Deferral of gains from like-kind exchanges 8,080 8,500 101,660

65 Credit for low-income housing investments 8,410 8,960 96,710

107 Parental personal exemption for students age 19 or over 9,500 9,490 96,330

64 Exception from passive loss rules for $25,000 of rental loss 7,710 8,060 92,610

127 Self-employed medical insurance premiums 8,170 7,750 91,970

131 Refundable Premium Assistance Tax Credit 11/ 6,310 7,100 91,970

2 Exclusion of income earned abroad by U.S. citizens 6,930 7,280 87,160

108 Deductibility of charitable contributions (education) 5,890 6,330 76,650

134 Tax credit for orphan drug research 2,760 3,340 75,050

133 Deductibility of charitable contributions (health) 5,530 5,960 72,360

79 Expensing of certain small investments (normal tax method) 3,400 3,710 63,990

66 Accelerated depreciation on rental housing (normal tax method) 2,680 3,510 61,950

118 Exclusion of employee meals and lodging (other than military) 4,990 5,150 56,780

155 Additional deduction for the elderly 3,770 4,050 53,870

119 Credit for child and dependent care expenses 4,690 4,790 50,860

4 Inventory property sales source rules exception 3,570 3,840 49,900

74 Carryover basis of capital gains on gifts 4,840 4,670 46,540

130 Exclusion of interest on hospital construction bonds 3,310 3,400 42,620

98 Exclusion of scholarship and fellowship income (normal tax method) 3,410 3,490 40,850

15 Energy production credit 1/ 2,230 2,870 40,120

86 Exclusion of reimbursed employee parking expenses 3,319 3,452 39,266

149 Premiums on group term life insurance 3,140 3,250 37,260

51 Exemption of credit union income 2,901 3,053 35,759

102 Qualified tuition programs 2,140 2,330 30,700

104 Exclusion of interest on bonds for private nonprofit educational facilities 2,200 2,260 28,350

158 Earned income tax credit 15/ 1,810 3,960 26,470

101 Deductibility of student-loan interest 2,360 2,390 25,450

FISCAL YEAR 2018-2027 PROJECTED REVENUE EFFECT

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

34
Provision 2018 2019 2018-27

153 Special ESOP rules 2,140 2,210 24,730

163 Exclusion of GI bill benefits 1,830 1,910 22,960

61 Deferral of income from installment sales 1,760 1,700 18,540

17 Energy investment credit 1/ 3,410 3,470 18,360

3 Exclusion of certain allowances for Federal employees abroad 1,430 1,510 18,040

72 Capital gains exclusion of small corporation stock 1,020 1,240 16,300

47 Capital gains treatment of certain income 1,550 1,470 16,100

87 Exclusion for employer-provided transit passes 1,192 1,270 15,934

152 Income of trusts to finance voluntary employee benefits associations 1,240 1,290 15,310

57 Exclusion of interest on owner-occupied mortgage subsidy bonds 1,120 1,150 14,490

147 Low and moderate income savers credit 1,470 1,470 14,460

160 Credit for certain employer contributions to social security 1,080 1,130 13,570

58 Exclusion of interest on rental housing bonds 1,040 1,070 13,390

80 Graduated corporation income tax rate (normal tax method) 1,510 1,440 13,100

123 Exclusion of parsonage allowances 970 1,021 12,367

109 Exclusion of employer-provided educational assistance 940 990 11,920

114 Employer provided child care exclusion 900 940 10,540

10 Excess of percentage over cost depletion, fuels 550 600 9,500

54 Tax exemption of insurance income earned by tax-exempt organizations 750 790 9,210

168 Deferral of interest on U.S. savings bonds 950 940 9,140

91 Exclusion of interest for airport, dock, and similar bonds 650 660 8,400

116 Assistance for adopted foster children 620 660 8,020

94 New markets tax credit 1,410 1,320 8,010

135 Special Blue Cross/Blue Shield tax benefits 610 630 7,690

141 Exclusion of public assistance benefits (normal tax method) 600 620 6,790

117 Adoption credit and exclusion 620 650 6,740

112 Qualified school construction bonds 9/ 650 650 6,500

162 Exclusion of veterans pensions 510 540 6,250

21 Exclusion of utility conservation subsidies 490 520 6,120

122 Exclusion of certain foster care payments 510 530 5,960

31 Credit for residential energy efficient property 1,380 1,360 5,720

137 Distributions from retirement plans for premiums for health and long-term care insurance 480 500 5,720

41 Tax incentives for preservation of historic structures 510 520 5,580

38 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 410 420 5,260

113 Work opportunity tax credit 1,340 1,370 5,210

157 Deductibility of casualty losses 350 380 4,830

103 Exclusion of interest on student-loan bonds 370 370 4,690

14 Enhanced oil recovery credit 350 400 4,570

34 Advanced nuclear power production credit 0 170 4,460

40 Expensing of multiperiod timber growing costs 350 350 3,890

45 Expensing of certain multiperiod production costs 320 330 3,820

95 Credit to holders of Gulf Tax Credit Bonds. 250 270 3,560

20 Tax credits for clean-fuel burning vehicles and refueling property 680 670 3,460

150 Premiums on accident and disability insurance 330 330 3,410

56 Exclusion of interest spread of financial institutions 240 280 3,120

35 Reduced tax rate for nuclear decommissioning funds 230 240 2,890

44 Expensing of certain capital outlays 200 210 2,520

110 Special deduction for teacher expenses 210 200 2,420

139 Exclusion of railroad retirement (Social Security equivalent) benefits 280 280 2,370

143 Exclusion of military disability pensions 180 180 2,000

96 Recovery Zone Bonds 6/ 140 150 1,970

48 Income averaging for farmers 150 160 1,890

9 Expensing of exploration and development costs, fuels -290 -30 1,860

81 Exclusion of interest on small issue bonds 150 140 1,840

92 Exemption of certain mutuals' and cooperatives' income 150 150 1,670

12 Capital gains treatment of royalties on coal 160 150 1,610

39 Capital gains treatment of certain timber income 160 150 1,610

89 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 190 170 1,510

37 Excess of percentage over cost depletion, nonfuel minerals 140 150 1,460

16 Marginal wells credit 110 70 1,140

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

35
Provision 2018 2019 2018-27

111 Discharge of student loan indebtedness 100 100 1,120

105 Credit for holders of zone academy bonds 8/ 180 170 1,070

84 Tonnage tax 80 90 1,020

24 Credit for investment in clean coal facilities 110 100 940

75 Ordinary income treatment of loss from small business corporation stock sale 80 80 870

69 Exceptions from imputed interest rules 60 60 780

22 Credit for holding clean renewable energy bonds 4/ 70 70 700

50 Expensing of reforestation expenditures 50 60 690

53 Exemption or special alternative tax for small property and casualty insurance companies 50 60 670

27 Amortize all geological and geophysical expenditures over 2 years 60 70 610

97 Tribal Economic Development Bonds 40 40 590

46 Treatment of loans forgiven for solvent farmers 50 50 560

43 Deduction for endangered species recovery expenditures 30 30 520

36 Expensing of exploration and development costs, nonfuel minerals 50 50 500

151 Income of trusts to finance supplementary unemployment benefits 30 40 490

154 Additional deduction for the blind 30 30 430

42 Industrial CO2 capture and sequestration tax credit 200 200 400

106 Exclusion of interest on savings bonds redeemed to finance educational expenses 30 30 400

55 Small life insurance company deduction 30 30 380

100 Education Individual Retirement Accounts 30 40 360

32 Qualified energy conservation bonds 5/ 30 30 300

132 Credit for employee health insurance expenses of small business 12/ 80 70 300

11 Exception from passive loss limitation for working interests in oil and gas properties 20 20 260

68 Discharge of business indebtedness 0 10 260

49 Deferral of gain on sale of farm refiners 20 20 220

83 Special rules for certain film and TV production 110 60 200

85 Deferral of tax on shipping companies 20 20 200

90 Investment credit for rehabilitation of structures (other than historic) 20 20 200

13 Exclusion of interest on energy facility bonds 10 10 180

164 Exclusion of interest on veterans housing bonds 10 10 180

125 Credit for employer differential wage payments 0 10 150

93 Empowerment zones 50 30 140

124 Indian employment credit 20 20 140

142 Exclusion of special benefits for disabled coal miners 20 20 140

115 Employer-provided child care credit 10 10 100

120 Credit for disabled access expenditures 10 10 100

29 Credit for construction of new energy efficient homes 70 10 80

136 Tax credit for health insurance purchased by certain displaced and retired individuals 13/ 20 10 30

156 Tax credit for the elderly and disabled 10 10 20

18 Alcohol fuel credits 2/ 0 0 0

19 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 0 0 0

30 Credit for energy efficiency improvements to existing homes 0 0 0

67 Discharge of mortgage indebtedness 0 0 0

88 Tax credit for certain expenditures for maintaining railroad tracks 0 0 0

166 Build America Bonds 16/ 0 0 0

33 Advanced Energy Property Credit 0 -20 -60

26 Natural gas distribution pipelines treated as 15-year property 150 150 -270

28 Allowance of deduction for certain energy efficient commercial building property -10 -30 -280

23 Deferral of gain from dispositions of transmission property to implement FERC restructuring policy -270 -210 -1,030

25 Temporary 50% expensing for equipment used in the refining of liquid fuels -1,140 -930 -3,960

77 Depreciation of buildings other than rental housing (normal tax method) -8,970 -9,570 -116,220

See Table 1 footnotes for specific table information

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

36
2017

Provision Present Value

of Revenue Loss

5 Deferral of income from controlled foreign corporations (normal tax method) 63,630

7 Expensing of research and experimentation expenditures (normal tax method) 3,390

22 Credit for holding clean renewable energy bonds 0

9 Expensing of exploration and development costs - fuels 740

36 Expensing of exploration and development costs - nonfuels 40

40 Expensing of multiperiod timber growing costs 110

45 Expensing of certain multiperiod production costs - agriculture 50

44 Expensing of certain capital outlays - agriculture 30

50 Expensing of reforestation expenditures 20

66 Accelerated depreciation on rental housing 14,080

77 Depreciation of buildings other than rental -5,300

78 Accelerated depreciation of machinery and equipment 27,200

78 Expensing of certain small investments (normal tax method) 1,320

105 Credit for holders of zone academy bonds 160

65 Credit for low-income housing investments 9,120

102 Qualified tuition programs 3,990

144 Defined benefit employer plans 29,729

145 Defined contribution employer plans 79,310

146 Exclusion of IRA contributions and earnings 1,600

146 Exclusion of Roth earnings and distributions 5,300

146 Exclusion of non-deductible IRA earnings 500

148 Exclusion of contributions and earnings for Self-Employed plans 5,480

165 Exclusion of interest on public-purpose bonds 16,520

Exclusion of interest on non-public purpose bonds 4,260

170 Deferral of interest on U.S. savings bonds 260

Table 4. PRESENT VALUE OF SELECTED TAX EXPENDITURES

FOR ACTIVITY IN CALENDAR YEAR 2017

(in millions of dollars)

U.S. Department of the Treasury 

Office of Tax Analysis 

October 16, 2017 

37