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TAX EXPENDITURES

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

Tax expenditures are defined in the law as “revenue losses attributable to provisions of the Federal tax laws which allow a special 

exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of 

tax liability.’’ These exceptions may be viewed as alternatives to other policy instruments, such as spending or regulatory programs.

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

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

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

An important assumption underlying each tax expenditure estimate reported below is that other parts of the Tax Code remain 

unchanged. The estimates would be different if tax expenditures were changed simultaneously because of potential interactions 

among provisions. For that reason, this document does not present a grand total for the estimated tax expenditures.

Tax expenditures relating to the individual and corporate income taxes are estimated for fiscal years 2022–2032 using two 

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

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

TAX EXPENDITURES IN THE INCOME TAX

Tax Expenditure Estimates

All tax expenditure estimates and descriptions presented here are based upon current tax law enacted as of July 31, 2022, and 

reflect the economic assumptions from the Midsession Review of the Fiscal Year 2023 Budget. In some cases, expired or repealed 

provisions are listed if their tax receipt effects occur in fiscal year 2022 or later.

The total receipt effects for tax expenditures for fiscal years 2022–2032 are displayed according to the Budget’s functional 

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

expenditure concept.

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

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

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

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

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

breakdowns show the form of tax liability that the various provisions affect. The ultimate beneficiaries of corporate tax expenditures could be shareholders, employees, customers, or other providers of capital, depending on economic forces.

Table 3 ranks the major tax expenditures by the size of their 2023–2032 receipt effect. The first column provides the number 

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

Interpreting Tax Expenditure Estimates

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

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

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

resulting magnitudes of the activity, or the consequences of other tax provisions or Government programs. For example, if capital 

gains were taxed at higher ordinary income tax rates, capital gain realizations would be expected to decline, which could result

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

estimates.

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

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

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

moved into higher tax brackets. Alternatively, repeal of an itemized deduction could lower the re ceipt 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 e xpenditures, because each is estimated assuming that the other remains in force. In addition, the estimates reported in Table 1 

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

possible interactions between individual and corporate income tax receipts. For this reason, the estimates in Table 1 should 

be regarded as approximations.

Present-Value Estimates

The annual value of tax expenditures for tax deferrals is reported on a cash basis in all tables except Table 4. Cash-based 

estimates reflect the difference between taxes deferred in the current year and incoming receipts that are received due to deferrals 

of taxes from prior years. Although such estimates are useful as a measure of cash flows into the Government, they do not 

accurately reflect the true economic cost of these provisions. For example, for a provision where activity levels have changed over 

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

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

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

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

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

tables.

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

during calendar year 2022 which cause the deferrals or other long-term receipt effects. For instance, a pension contribution in 

2022 would cause a deferral of tax payments on wages in 2022 and on pension fund earnings on this contribution (e.g., interest) 

in later years. In some future year, however, the 2022 pension contribution and accrued earnings will be paid out and taxes will 

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

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

Tax Expenditure Baselines

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

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

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

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

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

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

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

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

or by a specific definition of the taxpaying unit.

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

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

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

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

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

For example, under the normal tax and reference tax law baselines:
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• Income is taxable only when it is realized in exchange. Thus, the deferral of tax on unrealized capital gains is not regarded 

as a tax expenditure. Accrued income would be taxed under a comprehensive income tax.

•There is a separate corporate income tax. 

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

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

status.

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

basis of capital assets and debt for changes in the general price level. Thus, under a comprehensive income tax baseline, 

the failure to take account of inflation in measuring depreciation, capital gains, and interest income would be regarded 

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

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

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

part of the rate structure.

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

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

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

Income subject to the tax. Income subject to tax is defined as gross income less the costs of earning that income. Under the 

reference tax law, gross income does not include gifts defined as receipts of money or property that are not consideration in an 

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

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

and normal tax baselines.3

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

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

Descriptions of Income Tax Provisions

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

relate to current law as of July 31, 2022.

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. 

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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International Affairs

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

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

working abroad or whether it is labeled as a housing allowance. In contrast to this treatment, U.S. tax law allows U.S. citizens 

and residents who live abroad, work in the private sector, and satisfy a foreign residency requirement to exclude up to $80,000, 

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

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

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

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

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

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

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

abroad or whether it is labeled as an allowance for the high cost of living abroad. In contrast to this treatment, U.S. Federal 

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

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

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

the United States.

4. Reduced tax rate on active income of controlled foreign corporations (normal tax method).—Under the baseline tax system, 

worldwide income forms the tax base of U.S. corporations. In contrast, U.S. tax law exempts or preferentially taxes certain 

portions of this income. Prior to the passage of the Tax Cuts and Jobs Act TCJA (effective January 1, 2018), active foreign income 

was generally taxed only upon repatriation. TCJA changed these rules, so that certain active income (called “global intangible 

low tax income” or “GILTI”) is taxed currently, even if it is not distributed. However, U.S. corporations generally receive a 50

percent deduction from U.S. tax on their GILTI (the deduction decreases to 37.5 percent in 2026), resulting in a substantially 

reduced rate of tax. In addition, some active income is excluded from tax, and distributions out of active income are no longer 

taxed upon repatriation. These reductions and exemptions from U.S. taxation are considered tax expenditures. However, U.S. 

shareholders of specified foreign corporations must include their pro rata share of accumulated post-1986 deferred foreign income 

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

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

5. Deduction for foreign-derived intangible income derived from trade or business within the United States.—Under the baseline tax system, the United States taxes income earned by U.S. corporations from serving foreign markets (e.g., exports and 

royalties) at the full U.S. rate. After the passage of TCJA, domestic corporations are allowed a deduction equal to 37.5 percent of 

“foreign-derived intangible income,” which is essentially income from serving foreign markets (defined on a formulaic basis). The 

deduction falls to 21.875 percent in 2026. 

6. Interest Charge Domestic International Sales Corporations (IC-DISCs).—Under the baseline tax system, taxpayer earnings 

are subject to tax using the regular tax rates applied to all taxpayers. In contrast, IC-DISCs allow a portion of income from exports 

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

General Science, Space, and Technology

7. Expensing of research and experimentation expenditures (normal tax method).—The baseline tax system allows a deduction 

for the cost of producing income. It requires taxpayers to capitalize the costs associated with investments over time to better match 

the streams of income and associated costs. Research and experimentation (R&E) projects can be viewed as investments because,

if successful, their benefits accrue for several years. It is often difficult, however, to identify whether a specific R&E project is 

successful and, if successful, what its expected life will be. Because of this ambiguity, the reference tax law baseline system would 

allow expensing of R&E expenditures. In contrast, under the normal tax method, the expensing of R&E expenditures is viewed 

as a tax expenditure. The baseline assumed for the normal tax method is that all R&E expenditures are successful and have an 

expected life of five years. Current law requires R&E expenditures paid or incurred in taxable years beginning after December 31, 

2021, to be capitalized and amortized over 5 years, while allowing R&E expenditures paid or incurred in prior taxable years to 

be expensed.

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

allow credits for particular activities, investments, or industries. In contrast, the Tax Code allows an R&E credit of up to 20 

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 
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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, oil and gas.—Under the baseline tax system, the costs of exploring and 

developing oil and gas wells 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). Because expensing allows recovery of costs sooner, it is more advantageous to the taxpayer 

than amortization. Expensing provisions for exploration expenditures apply only to properties for which a deduction for percentage depletion is allowable. For oil and gas wells, integrated oil companies may expense only 70 percent of intangible drilling costs 

and must amortize the remaining 30 percent over five years. Non-integrated oil companies may expense all such costs.

10. Expensing of exploration and development costs, coal.— This is similar to the above provision but limited to coal. Current law allows immediate deduction of eligible exploration and development costs for domestic coal mines and other natural 

fuel deposits.

11. Excess of percentage over cost depletion, oil and gas.—The baseline tax system would allow recovery of the costs of 

developing certain oil and gas properties using cost depletion. Cost depletion is similar in concept to depreciation, in that the costs 

of developing or acquiring the asset are capitalized and then gradually reduced over an estimate of the asset’s economic life, as is 

appropriate for measuring net income. In contrast, the Tax Code generally allows independent fuel producers and royalty owners 

to take percentage depletion deductions rather than cost depletion on limited quantities of output. Under percentage depletion, 

taxpayers deduct a percentage of gross income from fossil fuel production. In certain cases the deduction is limited to a fraction 

of the asset’s net income. Over the life of an investment, percentage depletion deductions can exceed the cost of the investment. 

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

12. Excess of percentage over cost depletion, coal.—This is similar to the above provision but limited to coal.

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

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

wages, interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate, though there are numerous additional considerations brought to bear on the determination of which activities are passive 

for a given taxpayer. Losses are limited in an attempt to limit tax sheltering activities. Passive losses that are unused may be 

carried forward and applied against future passive income. An exception from the passive loss limitation is provided for a working 

interest in an oil or gas property that the taxpayer holds directly or through an entity that does not limit the liability of the taxpayer 

with respect to the interest. Thus, taxpayers can deduct losses from such working interests against nonpassive income without 

regard to whether they materially participate in the activity.

14. Capital gains treatment of royalties on coal.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. Current law allows 

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

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

15. 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.

16. 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.

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

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

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

power, municipal solid waste, or qualified hydropower and sold to an unrelated party. Wind facilities must have begun construction before January 1, 2022. Facilities that begin construction in 2017 receive 80 percent of the credit, facilities that begin construction in 2018 receive 60 percent of the credit, facilities that begin construction in 2019 receive 40 percent of the credit, and 

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

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

Code also provided an income tax credit for Indian coal facilities. The Indian coal facilities credit expired on December 31, 2021.
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18. 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.

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

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

provides credits for investments in solar and geothermal energy property, qualified fuel cell power plants, stationary microturbine 

power plants, geothermal heat pumps, waste energy recovery property, small wind property, offshore wind, and combined heat 

and power property. The credit is 30 percent for property that begins construction before 2020, 26 percent for property that begins 

construction in 2020-2022, and 22 percent for property that begins construction in 2023 and in all cases that is placed in service 

before January 1, 2026. The credit for offshore wind is 30 percent for facilities placed in service before January 1, 2026. A 10 

percent credit is available for geothermal or qualified solar property placed in service after December 31, 2025. Owners of renewable power facilities that qualify for the energy production credit may instead elect to take an energy investment credit at a rate 

specified by law.

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

credit. This provision expired on December 31, 2021. 

21. Bio-diesel and small agri-biodiesel producer tax credits.—The baseline tax system would not allow credits for particular 

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

However, the Tax Code allows an income tax credit for biodiesel and for Bio-diesel derived from virgin sources. In lieu of the 

Bio-diesel credit, the taxpayer can claim a refundable excise tax credit. In addition, small agri-biodiesel producers are eligible for 

a separate income tax credit for biodiesel production, and a separate credit is available for qualified renewable diesel fuel mixtures.

This provision expires on December 31, 2022. 

22. 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 electric-drive 

motor vehicle credit, expired after December 31, 2017.

23. 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.

24. Credit for holding clean renewable energy bonds.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides for the issuance 

of Clean Renewable Energy Bonds that entitle the bond holder to a Federal income tax credit in lieu of interest. As of March 

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

25. 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. 

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. Starting in 

2021, the maximum deduction amount per square foot will be increased by a cost-of -living adjustment.

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

activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. 
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However, the Tax Code allowed contractors a tax credit of $2,000 for the construction of a qualified new energy-efficient home 

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

2006 International Energy Conservation Code. The credit equaled $1,000 in the case of a new manufactured home that met a 30 

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

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, 2017, but legislation enacted in 

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

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 is 30 percent for property placed in service before January 

1, 2020, 26 percent for property placed in service in 2020- 2022, and 22 percent for property placed in service in 2023. 

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 investmentlike activities. In contrast, the Tax Code allows a tax credit equal to 1.8 cents times the number of kilowatt hours of electricity

produced at a qualifying advanced nuclear power facility. A taxpayer may claim no more than $125 million per 1,000 megawatts 

of capacity. The Treasury Department may allocate up to 6,000 megawatts of credit-eligible capacity. Any unutilized national 

capacity limitation shall be allocated after December 31, 2020, according to prioritization rules set forth by statute.

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 percent 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 receipts) rather than cost depletion, with percentage 

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

depletion deductions can exceed the cost of the investment. Consequently, percentage depletion may provide more advantageous 

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

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

rather than capitalized and deducted when the timber is sold, thereby accelerating cost recovery.
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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 for certified rehabilitation activities. The taxpayer’s recoverable basis must be reduced by the 

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

placed in service after December 31, 2017.

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

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

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

qualified carbon oxide that is captured at a qualified facility and used as a tertiary injectant in a qualified enhanced oil or natural 

gas recovery project. The credit differs according to whether the carbon was captured using equipment which was originally 

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

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 agriculture income.—The baseline tax system generally would tax all income under 

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

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

percent surtax). Certain agricultural income, such as unharvested crops, qualify for taxation as capital gains rather than ordinary 

income, and so benefit from the preferentially low 20 percent maximum tax rate on capital gains (plus the 3.8 percent surtax). 

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 sale 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 

dividends are exempt from the income tax.
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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 generally excludes 

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

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

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

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

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

gross receipts consist of premiums. Mutual non-life insurance companies are generally tax-exempt if their annual gross receipts 

do not exceed $150,000 and more than 35 percent of gross receipts consist of premiums. Also, non-life insurance companies with 

no more than a specified level of annual net written premiums generally may elect to pay tax only on their taxable investment 

income provided certain ownership diversification requirements are met. The underwriting income (premiums, less insurance 

losses and expenses) of electing companies is excluded from tax. The specified premium limit is indexed for inflation; for 2022,

the premium limit is $2.45 million.

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 certain 

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

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

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

income. Consumers pay for some deposit-linked services, such as check cashing, by accepting a below-market interest rate on

their demand deposits. If they received a market rate of interest on those deposits and paid explicit fees for the associated services, 

they would pay taxes on the full market rate and (unlike businesses) could not deduct the fees. The Government thus foregoes 

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

competitive conditions should equal the value of deposit services.

55. Exclusion of interest on owner-occupied mortgage subsidy bonds.—The baseline tax system generally would tax all 

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

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

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

56. 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.

57. Deductibility of 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. In the case of taxable years beginning after December 31, 2017, and before January 1, 2026, (1) the $1 million limit is reduced to $750,000 for indebtedness incurred after 

December 15, 2017, and (2) the deduction for interest on home equity indebtedness is disallowed.

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

on an investment is not taxed. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for the value of 

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

of taxable years beginning after December 31, 2017, and before January 1, 2026, (1) the deduction for foreign real property taxes 

paid is disallowed and (2) the deduction for taxes paid in any taxable year, which includes the deduction for property taxes on 

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

59. 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 
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March 6, 2023

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

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

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

therefore, a tax expenditure.

60. 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.

61. 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.

62. 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. 

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

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

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

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

benefits (such as tax-exempt bond financing) or (2) substantially rehabilitated existing housing. The credit can exceed these levels 

in certain statutorily defined and State designated areas where project development costs are higher. The credit is allowed in equal 

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

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

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

value due to wear and tear or obsolescence. This insures that the net income from the rental property is measured appropriately 

each year. Current law allows depreciation that is accelerated relative to economic depreciation. However, the depreciation provisions of the Tax Code are part of the reference tax law, and thus do not give rise to tax expenditures under reference tax law. 

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

65. 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 allows an exclusion from a taxpayer’s taxable income for any discharge of 

indebtedness of up to $750,000 ($375,000 in the case of a married individual filing a separate return) from a qualified principal 

residence. The provision applies to debt discharged after December 31, 2020, and before January 1, 2026.

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

income would be deductible, but such expenses would not be deductible when the income or the return on an investment is not 

taxed. Because imputed rental income is not subject to tax, mortgage insurance premiums do not represent expenses incurred in 

earning income. In contrast, the Tax Code allows mortgage insurance premiums to be treated as deductible mortgage interest 

expenses. The provision applies to premiums paid in 2021.

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 
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March 6, 2023

accounting rules. This general $250,000 exception is not a tax expenditure under reference tax law but is under normal tax baseline. Current law also includes exceptions for certain property worth more than $250,000. These are tax expenditure under reference tax law and normal tax baselines. These exceptions include, sales of personal residences worth more than $250,000, and 

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

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 in the budget window (plus a 3.8 percent surtax on high income taxpayers), 

depending on the taxpayer’s income. In contrast, under current law, qualified dividends are taxed at a preferentially low rate that 

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

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. 

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. 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.

75. 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.

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

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

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

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

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

77. Accelerated depreciation of machinery and equipment (normal tax method).—Under a comprehensive economic income 

tax, the costs of acquiring machinery and equipment are capitalized and depreciated over time in accordance with the decline in 

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

In particular, through 2022, 100 percent of the purchase cost of qualified property is eligible to be expensed immediately; this 

percentage phases out to zero through 2027. The depreciation provisions of the Tax Code are part of the reference tax law, and 

thus do not give rise to tax expenditures under reference tax law. Under the normal tax baseline, in contrast, depreciation allowances reflect estimates of economic depreciation.

78. Expensing of certain small investments (normal tax method).—Under the reference tax 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, subject to investment limitations, 

the Tax Code allows up to $1 million (indexed for inflation) in qualifying investments in tangible property and certain computer 

software to be expensed rather than depreciated over time.

79. 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 
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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. 

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

regular tax rate schedule. It would not allow deductions and exemptions or preferentially low (or zero) tax rates to apply to certain 

types or sources of income. In contrast, the Tax Code allowed taxpayers to deduct up to $15 million per production ($20 million 

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

of 2025. 

81. Allow 20-percent deduction to certain pass-through income.—The baseline tax system generally would tax all income under

the regular tax rate schedule. It would not allow deductions and exemptions or preferentially low (or zero) tax rates to apply to 

certain types or sources of income. In contrast, for tax years 2018 to 2025, the Tax Code allows for a deduction equal to up to 20

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

Transportation 

82. 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. 

83. 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). 

84. 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 

2022, the maximum amount of the parking exclusion is $280 per month. The tax expenditure estimate does not include any 

subsidy provided through employer-owned parking facilities. However, beginning in 2018, parking expenses are no longer 

deductible to employers.

85. 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 $280 per month in 2022. However, beginning in 2018, transit expenses are no longer deductible to 

employers. 

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

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

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

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

87. 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 

88. 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. 

89. 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 
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March 6, 2023

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

charges.

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

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

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

receive tax benefits such as an employment credit and special tax-exempt financing. A taxpayer’s ability to accrue new tax benefits 

for empowerment zones expires on December 31, 2025. 

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

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

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

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

92. 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.

93. 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.

94. 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.

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

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

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

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

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

for investments held for at least 7 years. In addition, capital gains from the sale or exchange of an investment in a qualified 

opportunity fund held for at least 10 years are excluded from gross income. 

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

the years 2017 through 2020 a 40 percent credit for up to $6,000 in wages paid to each eligible employee while the business was 

inoperable as a result of the disaster. Only wages paid after the disaster occurred and within 150 days of the last day of the incident 

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

Education, Training, Employment, and Social Services

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

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

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

scholarships and fellowships are either gifts not conditioned on the performance of services, or they are rebates of educational 

costs. Thus, under the baseline tax system of the reference tax law method, this exclusion is not a tax expenditure because this 

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

expenditure under the normal tax method, which includes gift-like transfers of Government funds in gross income. (Many scholarships are derived directly or indirectly from Government funding.)

98. Tax credits for post-secondary education expenses.—The baseline tax system would not allow credits for particular activities, investments, or industries. Under current law in 2022, however, there are two credits for certain post-secondary education 

expenses. The American Opportunity Tax Credit (AOTC) allows a partially refundable credit of up to $2,500 per eligible student 

for qualified tuition and related expenses paid. The AOTC may be claimed during each of the first four years of the student’s 

post-secondary education. The Lifetime Learning Credit (LLC) allows a non-refundable credit for 20 percent of an eligible student’s qualified tuition and fees, up to a maximum credit of $2,000 per return. The LLC may be claimed during any year of the 

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

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

for other taxpayers), not indexed. Married individuals filing separate returns cannot claim either credit. 
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March 6, 2023

99. 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 2022, the maximum deduction is phased down ratably for taxpayers with modified AGI 

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

separate returns cannot claim the deduction.

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

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

income. Some States have adopted prepaid tuition plans, prepaid room and board plans, and college savings plans, which allow 

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

return on prepayments, is not taxed when earned, and is tax-exempt when withdrawn to pay for qualified expenses. Beginning in 

2018, the definition of a qualified expense was expanded to include up to $10,000 per child per year of expenses for primary or 

secondary education, including tuition at religious schools.

101. 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.

102. 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.

103. 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 non-refundable 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. 

104. 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 $128,650 and $156,650 if married filing jointly ($83,200 and $98,200 for other 

taxpayers) in 2022.

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

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

own tax returns. These exemptions are repealed for taxable years beginning after December 31, 2017, and before January 1, 2026. 

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

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

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

have to be under age 19. In contrast, the Tax Code allows taxpayers to consider their children aged 19 to 23 as dependents, as 

long as the children are full-time students and reside with the taxpayer for over half the year (with exceptions for temporary 

absences from home, such as for school attendance). Absent this provision, children over 18 would need to meet the more stringent rules for qualified relatives in order to qualify the taxpayer for certain benefits, including the ODP.

106. Deductibility of charitable contributions (education).—The baseline tax system would not allow a deduction for personal 

expenditures. In contrast, the Tax Code provides taxpayers a deduction for contributions to nonprofit educational institutions 

that are similar to personal expenditures. Moreover, taxpayers who donate capital assets to educational institutions can deduct 

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

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

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

107. 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 it represents accretions to wealth that do 

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

an employee’s gross income, even though the employer’s costs for this assistance are a deductible business expense. The maximum exclusion is $5,250 per taxpayer. From March 27, 2020 through December 31, 2025 employer-provided student loan payments are considered eligible educational assistance.
U.S. Department of the Treasury

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March 6, 2023

108. 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).

109. 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.

110. 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.

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

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

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

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

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

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

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

has a $9,000 maximum. Also, certain categories of veterans are eligible for a higher maximum credit of up to $9,600. Employers 

must reduce their deduction for wages paid by the amount of the credit claimed.

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

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

113. 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.

114. 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.

115. 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. 

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

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

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

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

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

117. Credit for child and dependent care expenses.—The baseline tax system would not allow credits for particular activities 

or targeted at specific groups. In contrast, the Tax Code provides a tax credit to parents who work or attend school and who have 

child and dependent care expenses. In taxable year 2022, expenditures up to a maximum $3,000 for one dependent and $6,000 

for two or more dependents are eligible for a nonrefundable credit. The credit is equal to 35 percent of qualified expenditures for 

taxpayers with incomes of up to $15,000. The credit is reduced to a minimum of 20 percent by one percentage point for each 

$2,000 of income in excess of $15,000.

118. 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. 
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

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

deduction for personal expenditures including charitable contributions. In contrast, the Tax Code provides taxpayers a deduction 

for contributions to charitable, religious, and certain other nonprofit organizations. Taxpayers who donate capital assets to charitable organizations can deduct the assets’ current value without being taxed on any appreciation in value. An individual’s total 

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

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

120. 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.

121. 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.

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

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

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

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

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

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

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

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

Health

123. Exclusion of employer contributions for medical insurance premiums and medical care.—Under the baseline tax system, 

all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under 

current law, employer-paid health insurance premiums and other medical expenses (including long-term care or Health Reimbursement Accounts) are not included in employee gross income even though they are deducted as a business expense by the 

employee.

124. 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.

125. 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 2019, $3,500 for taxpayers with individual coverage and $7,000 for taxpayers with family 

coverage). Thus, HSAs have largely replaced MSAs.

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

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

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

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

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

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

127. 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.
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March 6, 2023

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

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

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

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

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

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

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

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

For 2021 and 2022, the legislation increased the Premium Tax Credit for currently eligible individuals and families, providing 

access to free plans for those earning 100 to 150 percent of the federal poverty level, and expanded eligibility to newly include 

individuals and families with income above 400 percent of the federal poverty level. The legislation also expanded eligibility in 

2021 to individuals who receive unemployment insurance for any week in 2021. The legislation also eliminated the requirement 

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

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

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

make a certain level of non-elective contributions towards the purchase of certain health insurance coverage for its employees. To 

receive a credit, an employer must have fewer than 25 full-time-equivalent employees whose average annual full-time-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 and 35 percent of premiums paid by qualified tax-exempt organizations.

130. Deductibility of charitable contributions (health).—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.

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

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

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

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

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

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

than 85 percent for the taxable year. A qualifying insurer may take as a deduction 100 percent of any net increase in its unearned 

premium reserves, instead of the 80 percent allowed other insurers. A qualifying insurer is also allowed a special deduction equal 

to the amount by which 25 percent of its health-claim expenses exceeds its beginning-of-the-year accounting surplus. The deduction is limited to the insurer’s taxable income determined without the special deduction.

133. 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.

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

particular activities or targeted as specific groups. Under current law, however, self-employed individuals are allowed a refundable 

credit equal for certain family or sick leave taken. In general, the sick leave credit is equal to 100% of daily self-employment 

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

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

period of qualified family leave for up to 10 weeks. Under current law, the credit applies to leave taken prior to October 1, 2021.

Income Security

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

Under current law, however, taxpayers with children under age 18 can qualify for a child tax credit. In taxable years 2022 through

2025, taxpayers may claim a $2,000 per child partially refundable child tax credit. Up to $1,500 per child of unclaimed credit due 
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March 6, 2023

to insufficient tax liability may be refundable—taxpayers may claim a refund for 15 percent of earnings in excess of a $2,500 floor, 

up to the lesser of the amount of unused credit or $1,500 per child. A taxpayer may also claim a nonrefundable credit of $500 for 

each qualifying child not eligible for the $2,000 credit (those over sixteen and those without SSNs) and for each dependent relative. 

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

above $400,000 if married filing jointly ($200,000 for all other filers). For tax years beginning after December 31, 2025, the credit 

returns to its pre-TCJA value of $1,000. At that time, up to the full value of the credit (subject to a phase-in of 15 percent of 

earnings in excess of $3,000) will be refundable and the $500 other dependent credit will expire. The credit will once again phase 

out at the rate of $50 per $1,000 of modified AGI above $110,000 if married filing jointly ($75,000 for single or head of household 

filers and $55,000 for married taxpayers filing separately).

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

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

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

a certain threshold under current law. See provision number 156, Social Security benefits for retired and disabled workers and 

spouses, dependents, and survivors, for a discussion of the threshold.

137. 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.

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

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

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

139. 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.

140. 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.

141. 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.

142. 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 2022, an employee could exclude up to 

$20,500 of wages from AGI under a qualified arrangement with an employer’s 401(k) plan. Employees age 50 or over could 

exclude up to $27,000 in contributions. The defined contribution plan limit, including both employee and employer contributions, 

is $61,000 in 2022. The tax on contributions made by both employees and employers and the investment income earned by these 

plans is deferred until withdrawn.

143. Individual Retirement Accounts (IRAs).—Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, 

under current law individual taxpayers can take advantage of traditional and Roth IRAs to defer or otherwise reduce the tax on 

the return to their retirement savings. The IRA contribution limit is $6,000 in 2022; taxpayers age 50 or over are allowed to make 

additional “catch-up’’ contributions of $1,000. Contributions to a traditional IRA are generally deductible but the deduction is 

phased out for workers with incomes above certain levels if the workers or their spouses are active participants in an employerprovided 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.

144. 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 $68,000 for joint filers, $51,000 for head of household filers,

and $34,000 for other filers in 2022. 

145. 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, 
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March 6, 2023

up to a maximum of $61,000 in 2022. 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.

146. 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.

147. Premiums on accident and disability insurance.—Under the baseline tax system, all compensation, including dedicated 

payments and in-kind benefits, should be included in taxable income. In contrast, under current law employer-provided accident 

and disability benefits are excluded from an employee’s gross income even though the employer’s costs for the benefits are a 

deductible business expense.

148. 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.

149. 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.

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

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

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

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

paid out as benefits. In addition, the following special income tax provisions for ESOPs are intended to increase 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 the payment (deductible by firm) of a portion of wages (excludable by the employees) to service the loan; 

(3) employees who sell appreciated company stock to the ESOP may defer any taxes due until they withdraw benefits; (4) dividends paid to ESOP-held stock are deductible by the employer; and (5) earnings are not taxed as they accrue.

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

standard deduction for a targeted group within a given filing status would not be allowed. In contrast, the Tax Code allows 

taxpayers who are blind to claim an additional $1,750 standard deduction if single or $1,400 if married in 2022.

152. 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 $1,750 standard deduction if single or $1,400 if married in 2022.

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

property is not included as a part of gross income, and uninsured losses are not deductible. In contrast, the Tax Code provides a 

deduction for uninsured casualty and theft losses of more than $100 each, to the extent that total losses during the year exceed 10 

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

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

area.

154. Earned income tax credit (EITC).—The baseline tax system would not allow credits for particular activities or targeted 

at specific groups. In contrast, the Tax Code provides an EITC to low-income workers at a maximum rate of 45 percent of income. 

In 2022, for a family with one qualifying child, the credit is 34 percent of the first $10,980 of earned income. The credit is 40 

percent of the first $14,950 of income for a family with two qualifying children, and it is 45 percent of the first $15,410 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 $7,320 of earned income. The credit plateaus and then phases out with the greater of AGI or earnings at income

levels and rates which depend upon how many qualifying children are eligible and marital status. In 2022, the phase-down for 

married filers begins at incomes $6,130 greater than for otherwise similar unmarried filers. Earned income tax credits in excess of

tax liabilities owed through the individual income tax system are refundable to individuals. Beginning in 2018, the parameters of 

the EITC are indexed by the chained CPI, which results in a smaller inflation adjustment than previously. This change is permanent.

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

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

married couples filing jointly) and 500 per child. The total rebate amount begins phasing out at adjusted gross income over $75,000 

($150,000 for married couples filing jointly, $112,500 for heads of household). This was followed by the Consolidated 
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March 6, 2023

Appropriations Act which provided rebates of $600 per eligible taxpayer ($1,200 for married couples filing jointly) plus an additional $600 per child, with phase-out features similar to the CARES Act. The American Rescue Plan act provided another rebate 

credit of $1,400 ($2,800 for married couples filing jointly) and $1,400 per dependent in 2021. The phase out begins at the same 

thresholds as the CARES Act, but the full credit is phased out proportionately by $80,000 of AGI ($160,000 for married couples 

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

Social Security

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

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

contrast, the Tax Code may not tax all of the Social Security benefits that exceed the beneficiary’s contributions from previously 

taxed income. Actuarially, previously taxed contributions generally do not exceed 15 percent of benefits, even for retirees receiving the highest levels of benefits. Therefore, up to 85 percent of recipients’ Social Security and Railroad Social Security Equivalent 

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

amounts. (Provisional income is equal to other items included in adjusted gross income plus foreign or U.S. possession income, 

tax-exempt interest, and one half of Social Security and Railroad Social Security Equivalent retirement benefits.) The untaxed 

portion of the benefits received by taxpayers who are below the income amounts at which 85 percent of the benefits are taxable 

is counted as a tax expenditure. Benefits paid to disabled workers and to spouses, dependents, and survivors are treated in a 

similar manner. Railroad Social Security Equivalent benefits are treated like Social Security benefits. See also provision number 

137, Exclusion of Railroad Social Security Equivalent Benefits.

157. Credit for certain employer contributions to Social Security.—Under the baseline tax system, employer contributions to 

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

tax credit, instead of a deduction, against taxes paid on tips received from customers in connection with the providing, delivering, 

or serving of food or beverages for consumption. The tip credit equals the full amount of the employer’s share of FICA taxes paid 

on the portion of tips, when added to the employee’s non-tip wages, in excess of $5.15 per hour. The credit is available only with 

respect to FICA taxes paid on tips.

Veterans Benefits and Services

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

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

wealth that do not materially differ from cash wages. In contrast, all compensation due to death or disability paid by the Veterans 

Administration is excluded from taxable income under current law.

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

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

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

income.

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

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

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

income.

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

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

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

housing for veterans is excluded from taxable income.

General Government

162. Exclusion of interest on public purpose State and local bonds.—The baseline tax system generally would tax all income 

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

income. In contrast, under current law interest earned on State and local government bonds issued to finance public-purpose 

construction (e.g., schools, roads, sewers), equipment acquisition, and other public purposes is tax-exempt. Interest on bonds 

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

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

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

Office of Tax Analysis

March 6, 2023

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

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

164. Deductibility of nonbusiness State and local taxes other than on owner-occupied homes.—Under the baseline tax system, 

a deduction for personal consumption expenditures would not be allowed. In contrast, the Tax Code allows taxpayers who itemize their deductions to claim a deduction for State and local income taxes (or, at the taxpayer’s election, State and local sales

taxes) and property taxes, even though these taxes primarily pay for services that, if purchased directly by taxpayers, would not 

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

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

1, 2026, (1) the deduction for foreign real property taxes paid is disallowed and (2) the deduction for taxes paid in any taxable 

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

individual filing a separate return).

Interest

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

not allow an exemption or deferral for particular activities, investments, or industries. In contrast, taxpayers may defer paying 

tax on interest earned on U.S. savings bonds until the bonds are redeemed.
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023-32

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 14,830 15,380 15,970 16,600 15,370 15,560 16,130 16,840 17,620 18,450 19,350 167,270

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,700 7,160 7,560 7,950 8,360 8,790 9,250 9,740 10,250 10,780 11,340 91,180

3 Exclusion of certain allowances for Federal employees abroad 260 280 290 310 320 340 360 380 400 420 450 3,550

4 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 30,540 32,840 35,110 37,200 33,200 30,910 31,870 32,520 33,270 34,080 34,910 335,910

5 Deduction for foreign-derived intangible income derived from trade or business within the United States 11,900 12,790 13,680 14,490 9,130 9,590 9,890 10,090 10,330 10,580 10,840 111,410

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 1,140 1,780 1,880 1,980 2,190 2,410 2,570 2,690 2,820 2,950 3,110 24,380

General science, space, and technology: 

7 Expensing of research and experimentation expenditures (normal tax method) -19,820 -35,610 -25,800 -15,690 -4,950 0 0 0 0 0 0 -82,050

8 Credit for increasing research activities 23,260 24,980 26,530 28,060 29,590 31,140 32,730 34,380 36,110 37,920 39,790 321,230

Energy: 

9 Expensing of exploration and development costs, oil and gas 720 470 300 180 160 240 330 350 340 330 300 3,000

10 Expensing of exploration and development costs, coal 60 40 30 10 10 20 30 30 30 30 30 260

11 Excess of percentage over cost depletion, oil and gas 910 1,040 1,100 1,130 1,180 1,260 1,340 1,410 1,470 1,530 1,590 13,050

12 Excess of percentage over cost depletion, coal 50 60 80 80 80 80 80 80 80 90 90 800

13 Exception from passive loss limitation for working interests in oil and gas properties 10 10 10 10 10 10 10 10 10 10 10 100

14 Capital gains treatment of royalties on coal 50 50 50 50 60 60 60 70 70 70 70 610

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

16 Enhanced oil recovery credit 390 240 200 140 40 0 0 0 0 0 0 620

17 Energy production credit 4,160 4,540 4,830 4,970 4,630 4,330 3,930 3,510 2,860 2,260 1,560 37,420

18 Marginal wells credit 280 190 80 20 0 0 0 0 0 0 0 290

19 Energy investment credit 7,340 9,490 11,160 8,320 6,260 5,170 3,710 3,430 3,150 3,890 3,760 58,340

20 Alcohol fuel credits 1/ 0 0 0 0 0 0 0 0 0 0 0 0

21 Bio-Diesel and small agri-biodiesel producer tax credits 2/ 30 20 0 0 0 0 0 0 0 0 0 20

22 Tax credits for clean-fuel burning vehicles and refueling property 1,082 1,076 1,005 956 917 829 769 754 749 690 591 8,337

23 Exclusion of utility conservation subsidies 50 50 50 40 40 40 30 30 30 30 20 360

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

25 Credit for investment in clean coal facilities 0 10 20 40 40 40 30 30 20 20 40 290

26 Amortize all geological and geophysical expenditures over 2 years 120 140 150 150 150 150 150 140 140 120 120 1,410

27 Allowance of deduction for certain energy efficient commercial building property 160 140 140 150 160 170 170 170 170 170 170 1,610

28 Credit for construction of new energy efficient homes 120 100 100 100 100 60 20 10 0 0 0 490

29 Credit for energy efficiency improvements to existing homes 450 0 0 0 0 0 0 0 0 0 0 0

30 Credit for residential energy efficient property 2,700 2,380 680 220 0 0 0 0 0 0 0 3,280

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

32 Advanced energy property credit 10 10 10 10 10 10 10 10 0 0 0 70

33 Advanced nuclear power production credit 0 60 180 220 240 270 280 280 280 230 100 2,140

34 Reduced tax rate for nuclear decommissioning funds 110 120 120 130 130 140 150 150 160 170 170 1,440

Natural resources and environment: 

35 Expensing of exploration and development costs, nonfuel minerals 70 40 30 10 10 20 30 40 40 30 30 280

36 Excess of percentage over cost depletion, nonfuel minerals 190 220 230 230 250 260 280 280 300 310 330 2,690

37 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 370 380 360 350 340 340 390 370 380 410 430 3,750

38 Capital gains treatment of certain timber income 150 160 160 170 180 200 210 220 230 240 250 2,020

39 Expensing of multiperiod timber growing costs 230 240 260 260 270 290 300 320 330 350 350 2,970

40 Tax incentives for preservation of historic structures 580 660 790 890 950 970 970 970 980 990 980 9,150

41 Carbon oxide sequestration credit 360 310 370 570 740 1,890 2,470 2,740 5,760 7,660 7,790 30,300

42 Deduction for endangered species recovery expenditures 30 30 40 40 40 60 60 60 70 70 80 550

Agriculture: 

43 Expensing of certain capital outlays 120 120 120 130 150 160 170 180 190 190 200 1,610

44 Expensing of certain multiperiod production costs 260 260 260 270 330 370 390 400 420 430 450 3,580

45 Treatment of loans forgiven for solvent farmers 60 60 60 60 70 70 70 70 70 70 70 670

46 Capital gains treatment of certain agriculture income 1,500 1,580 1,600 1,670 1,830 1,980 2,060 2,160 2,260 2,360 2,470 19,970

47 Income averaging for farmers 200 210 210 220 230 230 230 230 230 230 230 2,250

48 Deferral of gain on sale of farm refiners 15 15 20 20 20 20 20 20 25 25 25 210

49 Expensing of reforestation expenditures 60 60 70 70 80 80 80 80 80 80 90 770

Commerce and housing: 

Financial institutions and insurance: 

50 Exemption of credit union income 3,070 2,910 2,960 3,110 3,310 3,480 3,590 3,700 3,850 3,880 3,930 34,720

51 Exclusion of life insurance death benefits 16,020 17,560 18,760 19,270 20,000 21,090 21,430 21,900 22,480 23,040 23,560 209,090

52 Exemption or special alternative tax for small property and casualty insurance companies 1,220 1,310 1,340 1,370 1,430 1,460 1,490 1,550 1,590 1,650 1,700 14,890

53 Tax exemption of insurance income earned by tax-exempt organizations 350 370 380 390 390 400 410 420 430 430 440 4,060

54 Exclusion of interest spread of financial institutions 7,330 8,670 7,790 7,620 7,990 8,200 8,170 8,310 8,440 8,540 8,660 82,390

Housing: 

55 Exclusion of interest on owner-occupied mortgage subsidy bonds 1,130 1,140 1,070 1,060 1,030 1,030 1,150 1,090 1,150 1,220 1,280 11,220

56 Exclusion of interest on rental housing bonds 2,090 2,090 1,980 1,950 1,900 1,900 2,100 2,010 2,120 2,230 2,360 20,640

57 Deductibility of mortgage interest on owner-occupied homes 34,430 35,660 36,820 38,730 107,230 113,890 120,340 127,360 134,670 142,440 149,370 1,006,510

58 Deductibility of State and local property tax on owner-occupied homes 17/ 5,110 7,420 7,290 7,440 41,360 60,900 64,490 67,960 71,660 75,640 79,860 484,020

59 Deferral of income from installment sales 1,720 1,700 1,720 1,780 1,850 1,920 2,000 2,090 2,180 2,270 2,370 19,880

60 Capital gains exclusion on home sales 49,200 50,540 52,260 54,120 61,890 64,490 67,140 69,540 72,520 75,730 78,840 647,070

61 Exclusion of net imputed rental income 128,950 133,660 134,950 135,950 163,430 169,360 175,230 181,470 188,130 195,360 202,010 1,679,550

62 Exception from passive loss rules for $25,000 of rental loss 4,970 5,120 5,260 5,590 6,130 6,280 6,410 6,580 6,740 6,890 7,040 62,040

63 Credit for low-income housing investments 11,280 10,550 10,390 10,360 10,440 10,750 11,060 11,390 11,720 12,040 12,390 111,090

64 Accelerated depreciation on rental housing (normal tax method) 3,490 2,560 2,560 3,260 4,170 5,080 5,920 6,790 7,420 8,050 8,640 54,450

65 Discharge of mortgage indebtedness 380 320 330 340 0 0 0 0 0 0 0 990

66 Premiums for mortgage insurance deductible as interest 150 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

67 Discharge of business indebtedness 40 70 50 40 40 30 40 40 40 40 60 450

68 Exceptions from imputed interest rules 30 50 60 60 70 70 80 80 80 80 80 710

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2022-2032

(in millions of dollars)

Total from corporations and individuals
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

69 Treatment of qualified dividends 33,290 34,830 36,440 38,140 41,880 45,600 47,430 49,500 51,660 53,890 56,230 455,600

70 Capital gains (except agriculture, timber, iron ore, and coal) 112,050 118,340 119,820 124,780 136,680 148,170 154,180 161,180 168,490 176,240 184,520 1,492,400

71 Capital gains exclusion of small corporation stock 1,680 1,770 1,850 1,930 2,000 2,070 2,150 2,240 2,330 2,430 2,530 21,300

72 Step-up basis of capital gains at death 46,750 49,240 51,860 53,570 56,430 61,630 65,950 70,340 75,400 80,860 86,810 652,090

73 Carryover basis of capital gains on gifts 2,700 2,960 3,310 3,830 4,020 4,490 4,890 4,700 4,630 4,620 4,920 42,370

74 Ordinary income treatment of loss from small business corporation stock sale 70 70 80 80 80 90 90 90 100 100 110 890

75 Deferral of gains from like-kind exchanges 3,830 4,020 4,230 5,430 5,569 4,870 5,130 5,380 5,640 5,940 6,240 52,449

76 Depreciation of buildings other than rental housing (normal tax method) 2,720 490 -470 -470 -480 -650 -460 -10 310 700 1,070 30

77 Accelerated depreciation of machinery and equipment (normal tax method) 22,780 6,100 -8,220 -18,560 -28,460 -39,050 -30,300 -15,830 -7,290 -1,990 1,470 -142,130

78 Expensing of certain small investments (normal tax method) -910 4,300 8,240 10,330 13,100 16,420 15,150 12,530 11,080 10,380 10,130 111,660

79 Exclusion of interest on small issue bonds 320 300 280 280 200 140 250 190 230 310 300 2,480

80 Special rules for certain film and TV production 0 100 180 240 -390 -530 -260 -120 -50 -20 0 -850

81 Allow 20-percent deduction to certain pass-through income 51,070 50,230 50,770 53,010 21,720 0 0 0 0 0 0 175,730

Transportation: 

82 Tonnage tax 90 100 100 100 100 100 110 110 110 110 120 1,060

83 Deferral of tax on shipping companies 10 10 10 10 10 10 10 10 10 10 10 100

84 Exclusion of reimbursed employee parking expenses 1,707 2,066 2,124 2,193 2,304 2,413 2,521 2,641 2,822 3,011 3,212 25,307

85 Exclusion for employer-provided transit passes 341 407 428 450 490 522 563 603 686 774 870 5,793

86 Tax credit for certain expenditures for maintaining railroad tracks 170 130 80 60 40 30 30 20 10 10 0 410

87 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 160 140 140 130 130 120 110 110 100 100 140 1,220

Community and regional development: 

88 Exclusion of interest for airport, dock, and similar bonds 1,350 1,350 1,280 1,260 1,220 1,230 1,360 1,300 1,370 1,440 1,530 13,340

89 Exemption of certain mutuals' and cooperatives' income 100 100 100 110 110 110 110 110 120 120 120 1,110

90 Empowerment zones 90 90 90 110 90 60 40 20 20 20 20 560

91 New markets tax credit 1,170 1,210 1,250 1,310 1,360 1,340 1,230 1,060 870 640 410 10,680

92 Credit to holders of Gulf Tax Credit Bonds. 150 140 120 110 90 90 80 80 70 60 50 890

93 Recovery Zone Bonds 5/ 130 130 110 100 90 80 80 70 60 50 50 820

94 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 20 110

95 Opportunity Zones 3,740 2,080 2,160 1,990 -6,400 -12,400 670 880 1,130 1,320 1,550 -7,020

96 Disaster Employee Retention Credit 110 140 60 60 50 40 40 30 30 20 10 480

Education, training, employment, and social services: 

Education: 

97 Exclusion of scholarship and fellowship income (normal tax method) 4,110 4,230 4,460 4,720 5,270 6,090 6,430 6,780 7,160 7,540 7,960 60,640

98 Tax credits and deductions for postsecondary education expenses 6/ 15,460 14,820 14,580 14,380 14,270 14,250 13,970 13,680 13,380 13,030 12,660 139,020

99 Deductibility of student-loan interest 2,340 2,230 2,350 2,470 2,640 3,010 3,040 3,140 3,160 3,170 3,260 28,470

100 Qualified tuition programs (includes Education IRA) 2,790 2,960 3,280 3,730 4,550 5,470 6,550 7,980 9,860 12,370 15,700 72,450

101 Exclusion of interest on student-loan bonds 190 200 190 190 180 180 200 190 200 210 220 1,960

102 Exclusion of interest on bonds for private nonprofit educational facilities 2,960 2,960 2,790 2,750 2,680 2,680 2,970 2,840 3,000 3,170 3,330 29,170

103 Credit for holders of zone academy bonds 7/ 110 90 80 60 50 50 40 40 40 30 30 510

104 Exclusion of interest on savings bonds redeemed to finance educational expenses 40 40 40 40 50 50 50 50 50 50 60 480

105 Parental personal exemption for students age 19 or over 1,910 2,930 2,890 2,770 4,650 5,580 5,490 5,420 5,320 5,160 5,050 45,260

106 Deductibility of charitable contributions (education) 7,270 7,730 8,170 8,600 10,260 13,220 13,820 14,480 14,720 14,970 15,230 121,200

107 Exclusion of employer-provided educational assistance 1,510 1,630 1,730 1,840 1,630 1,530 1,610 1,680 1,760 1,850 1,930 17,190

108 Special deduction for teacher expenses 180 180 180 180 190 210 210 210 210 220 220 2,010

109 Discharge of student loan indebtedness 80 90 110 120 140 170 190 210 230 260 290 1,810

110 Qualified school construction bonds 8/ 520 490 470 440 410 390 360 330 320 290 260 3,760

Training, employment, and social services: 

111 Work opportunity tax credit 1,730 1,790 1,840 1,900 1,270 520 350 270 210 150 120 8,420

112 Employer provided child care exclusion 550 740 810 860 1,110 1,250 1,300 1,360 1,430 1,510 1,580 11,950

113 Employer-provided child care credit 20 20 20 20 20 20 20 30 40 40 40 270

114 Assistance for adopted foster children 670 810 940 1,020 1,100 1,210 1,330 1,460 1,600 1,770 1,960 13,200

115 Adoption credit and exclusion 870 900 920 930 940 950 960 970 980 990 990 9,530

116 Exclusion of employee meals and lodging (other than military) 6,440 6,800 6,680 6,840 8,080 8,820 9,070 9,360 9,650 9,960 10,290 85,550

117 Credit for child and dependent care expenses 9/ 5,850 3,570 3,720 3,820 3,920 3,980 4,040 4,090 4,140 4,200 4,280 39,760

118 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

119 Deductibility of charitable contributions, other than education and health 55,500 58,860 62,250 65,550 79,070 103,560 108,430 113,540 118,890 124,490 130,170 964,810

120 Exclusion of certain foster care payments 480 570 660 710 790 860 940 1,030 1,130 1,250 1,390 9,330

121 Exclusion of parsonage allowances 970 1,020 1,070 1,130 1,190 1,260 1,320 1,390 1,460 1,540 1,620 13,000

122 Indian employment credit 50 30 30 20 20 20 20 10 10 10 10 180

Health: 

123 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 224,520 237,400 252,430 266,010 308,280 338,270 354,440 372,310 391,600 412,050 433,530 3,366,320

124 Self-employed medical insurance premiums 8,200 8,440 8,840 9,580 11,860 13,560 14,430 15,230 15,960 16,780 17,690 132,370

125 Medical Savings Accounts / Health Savings Accounts 13,000 13,890 14,150 14,760 16,840 18,270 18,860 19,500 20,210 20,760 21,420 178,660

126 Deductibility of medical expenses 9,910 10,900 11,350 12,170 18,390 22,760 24,640 26,630 28,700 30,900 33,280 219,720

127 Exclusion of interest on hospital construction bonds 4,040 4,050 3,830 3,760 3,680 3,680 4,060 3,890 4,100 4,330 4,570 39,950

128 Refundable Premium Assistance Tax Credit 11/ 14,730 9,830 7,380 8,330 9,570 9,930 10,570 11,540 11,900 12,400 13,110 104,560

129 Credit for employee health insurance expenses of small business 40 30 10 10 0 0 0 0 0 0 0 50

130 Deductibility of charitable contributions (health) 10,570 11,170 11,770 12,350 14,090 17,030 17,820 18,620 19,470 20,330 21,210 163,860

131 Tax credit for orphan drug research 1,970 2,300 2,680 3,120 3,640 4,250 4,960 5,790 6,760 7,900 9,220 50,620

132 Special Blue Cross/Blue Shield tax benefits 320 370 380 400 420 440 460 490 530 570 610 4,670

133 Distributions from retirement plans for premiums for health and long-term care insurance 460 470 490 500 590 630 650 660 670 670 680 6,010

134 Credit for family and sick leave taken by self-employed individuals 12/ 2,790 760 0 0 0 0 0 0 0 0 0 760

Income security: 

135 Child tax credit 13/ 66,840 67,520 68,130 48,680 18,760 18,310 17,890 17,460 17,040 16,640 16,440 306,870

136 Exclusion of railroad retirement (Social Security equivalent) benefits 300 260 240 220 220 210 180 150 120 90 50 1,740

137 Exclusion of workers' compensation benefits 9,020 9,030 9,040 9,040 9,050 9,060 9,070 9,080 9,080 9,090 9,100 90,640

138 Exclusion of public assistance benefits (normal tax method) 670 670 660 690 730 760 800 820 810 860 880 7,680

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

140 Exclusion of military disability pensions 180 180 180 190 210 230 230 240 250 250 260 2,220 Net exclusion of pension contributions and earnings: 

141 Defined benefit employer plans 69,340 69,560 69,950 69,340 77,660 76,780 76,650 76,270 76,350 75,110 74,180 741,850

142 Defined contribution employer plans 106,710 115,490 117,830 122,100 146,190 153,200 160,100 167,700 176,330 184,010 192,750 1,535,700

143 Individual Retirement Accounts 23,600 24,430 25,020 26,630 32,940 35,690 38,310 40,540 43,380 46,430 49,560 362,930

144 Low and moderate income savers credit 1,260 1,380 1,440 1,460 1,570 1,540 1,520 1,490 1,450 1,440 1,410 14,700

145 Self-Employed plans 34,420 37,250 38,000 39,380 47,150 49,410 51,640 54,090 56,870 59,350 62,170 495,310

Exclusion of other employee benefits: 

146 Premiums on group term life insurance 3,330 3,390 3,480 3,590 4,090 4,360 4,500 4,650 4,810 4,970 5,130 42,970

147 Premiums on accident and disability insurance 340 340 350 350 350 350 350 350 350 350 360 3,500

148 Income of trusts to finance supplementary unemployment benefits 20 30 40 40 40 40 50 50 50 50 50 440

149 Income of trusts to finance voluntary employee benefits associations 1,240 1,310 1,400 1,490 1,670 1,730 1,820 1,920 2,010 2,110 2,210 17,670

150 Special ESOP rules 210 220 220 230 230 240 240 260 270 270 280 2,460

151 Additional deduction for the blind 40 40 50 50 40 50 50 50 60 60 60 510

152 Additional deduction for the elderly 6,300 6,920 7,430 7,970 6,580 7,030 7,540 7,940 8,490 9,050 9,640 78,590

153 Deductibility of casualty losses 0 0 0 0 720 1,090 1,130 1,170 1,220 1,290 1,350 7,970

154 Earned income tax credit 14/ 2,410 2,700 3,010 3,230 3,340 5,030 5,200 5,340 5,540 5,690 5,890 44,970

155 Recovery rebate credits 15/ 19,320 770 0 0 0 0 0 0 0 0 0 770
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

Social Security: 

Exclusion of social security benefits: 

156 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 29,760 31,350 31,730 31,870 36,830 42,970 44,940 47,000 49,070 51,160 53,450 420,370

157 Credit for certain employer contributions to Social Security 1,170 1,300 1,390 1,480 1,570 1,660 1,750 1,840 1,930 2,020 2,110 17,050

Veterans benefits and services: 

158 Exclusion of veterans death benefits and disability compensation 10,430 11,260 11,780 12,050 12,980 14,680 15,270 15,870 16,490 17,140 17,830 145,350

159 Exclusion of veterans pensions 250 220 210 200 210 220 220 220 220 210 210 2,140

160 Exclusion of GI bill benefits 1,540 1,500 1,510 1,530 1,630 1,820 1,880 1,930 1,980 2,040 2,100 17,920

161 Exclusion of interest on veterans housing bonds 100 100 100 100 90 100 110 100 100 110 120 1,030

General purpose fiscal assistance: 

162 Exclusion of interest on public purpose State and local bonds 38,610 38,650 36,550 35,970 35,070 35,090 38,800 37,200 39,220 41,380 43,640 381,570

163 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

164 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 17/ 5,750 8,200 7,950 7,980 90,040 127,850 131,020 138,470 146,370 155,060 164,400 977,340

Interest: 

165 Deferral of interest on U.S. savings bonds 830 820 810 800 800 790 780 770 760 750 750 7,830

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 5,110 7,420 7,290 7,440 41,360 60,900 64,490 67,960 71,660 75,640 79,860 484,020

5,750 8,200 7,950 7,980 90,040 127,850 131,020 138,470 146,370 155,060 164,400 977,340

Exclusion of interest on State and local bonds for: 

Public purposes 38,610 38,650 36,550 35,970 35,070 35,090 38,800 37,200 39,220 41,380 43,640 381,570

Energy facilities 10 10 10 10 10 10 10 10 10 10 10 100

370 380 360 350 340 340 390 370 380 410 430 3,750

Small-issues 90 90 90 90 80 80 90 90 90 100 100 900 Owner-occupied mortgage subsidies 1,130 1,140 1,070 1,060 1,030 1,030 1,150 1,090 1,150 1,220 1,280 11,220 Rental housing 2,090 2,090 1,980 1,950 1,900 1,900 2,100 2,010 2,120 2,230 2,360 20,640

Airports, docks, and similar facilities 1,350 1,350 1,280 1,260 1,220 1,230 1,360 1,300 1,370 1,440 1,530 13,340

Student loans 190 200 190 190 180 180 200 190 200 210 220 1,960

Private nonprofit educational facilities 2,960 2,960 2,790 2,750 2,680 2,680 2,970 2,840 3,000 3,170 3,330 29,170 Hospital construction 4,040 4,050 3,830 3,760 3,680 3,680 4,060 3,890 4,100 4,330 4,570 39,950

Veterans' housing 100 100 100 100 90 100 110 100 100 110 120 1,030

1/ The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2022 $310; and $0 thereafter.

2/ In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2022 $3,660; 2023 $1,890; and $0 thereafter.

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

2022 $40; 2023 $40; 2024 $40; 2025 $40; 2026 $40; 2027 $40; 2028 $40; 2029 $40; 2030 $40; 2031 $40; and 2032 $40.

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

2022 $40; 2023 $40; 2024 $30; 2025 $30; 2026 $30; 2027 $30; 2028 $30; 2029 $30; 2030 $30; 2031 $30; and 2032 $30.

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

2022 $110; 2023 $110; 2024 $110; 2025 $110; 2026 $110; 2027 $100; 2028 $100; 2029 $100; 2030 $100; 2031 $100; and 2032 $100.

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

2022 $4,020; 2023 $3,060; 2024 $3,030; 2025 $3,000; 2026 $2,980; 2027 $2,950; 2028 $2,910; 2029 $2,870; 2030 $2,820; 2031 $2,770; and 2032 $2,710.

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

2022 $40; 2023 $40; 2024 $40; 2025 $40; 2026 $40; 2027 $40; 2028 $40; 2029 $40; 2030 $40; 2031 $40; and 2032 $40.

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

2022 $560; 2023 $560; 2024 $560; 2025 $550; 2026 $550; 2027 $550; 2028 $540; 2029 $540; 2030 $540; 2031 $530; and 2032 $560.

9/ In addition, the child and dependent care credit is refundable for one year with outlay effects of (millions of dollars): 

2022 $7,790; 2023 $50; and $0 thereafter.

10/ In addition, the employer contributions for health have effects on payroll tax receipts (in millions of dollars) as follows:

2022 $136,990; 2023 $149,180; 2024 $159,420; 2025 $168,350; 2026 $176,710; 2027 $184,450; 2028 $192,430; 2029 $201,100; 2030 $210,610; 2031 $220,800; and 2032 $231,700.

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

2022 $61,580; 2023 $45,010; 2024 $39,900; 2025 $41,220; 2026 $42,440; 2027 $43,840; 2028 $46,270; 2029 $49,690; 2030 $52,790; 2031 $55,410; and 2032 $57,980.

12/ In addition, the effect of the credit for sick leave has outlay effects of (in millions of dollars):

2022 $4,490; 2023 $860; and $0 thereafter.

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

2022 $158,940; 2023 $40,840; 2024 $41,340; 2025 $41,170; 2026 $41,150; 2027 $24,800; 2028 $24,570; 2029 $24,480; 2030 $24,440; 2031 $24,460; and 2032 $25,350.

The child tax credit line also includes the credit for other dependents (in millions of dollars): 

2022 $10,870; 2023 $9,700; 2024 $9,770; 2025 $9,760; 2026 $5,640; and $0 thereafter.

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

2022 $77,290; 2023 $59,780; 2024 $63,920; 2025 $66,730; 2026 $67,570; 2027 $67,080; 2028 $67,960; 2029 $69,220; 2030 $70,640; 2031 $71,960; and 2032 $73,400.

15/ In addition, the recovery rebate credits have outlay effects of (in millions of dollars):

2022 $13,620; 2023 $360; and $0 thereafter.

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

2022 $2,500; 2023 $2,470; 2024 $2,440; 2025 $2,420; 2026 $2,390; 2027 $2,360; 2028 $2,340; 2029 $2,310; 2030 $2,280; 2031 $2,250; and 2032 $2,360.

17/ Because of interactions with the $10,000 cap on state and local tax deductions for the years 2018 through 2025, these estimates understate the combined effects 

of repealing deductions for both property taxes on owner occupied housing and other non-business taxes. The estimate of repealing both is (in millions of dollars):

2022 $18,080; 2023 $26,580; 2024 $26,340; 2025 $26,950; 2026 $135,670; 2027 $188,800; 2028 $195,460; 2029 $206,830; 2030 $218,990; 2031 $232,280; and 2032 $246,290.

Water, sewage, and hazardous waste disposal facilities 

Nonbusiness State and local taxes other than on owner-occupied homes 
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023-32

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 0 0 0 0 0 0 0 0 0 0 0 0

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 0 0 0 0 0 0 0 0 0 0 0 0

3 Exclusion of certain allowances for Federal employees abroad 0 0 0 0 0 0 0 0 0 0 0 0

4 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 30,340 32,620 34,880 36,950 32,980 30,700 31,660 32,300 33,050 33,850 34,680 333,670

5 Deduction for foreign-derived intangible income derived from trade or business within the United States 11,900 12,790 13,680 14,490 9,130 9,590 9,890 10,090 10,330 10,580 10,840 111,410

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 0 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 Expensing of research and experimentation expenditures (normal tax method) -18,450 -30,030 -21,670 -13,040 -3,840 0 0 0 0 0 0 -68,580

8 Credit for increasing research activities 21,110 22,660 24,060 25,430 26,800 28,180 29,590 31,050 32,570 34,150 35,780 290,270

Energy: 

9 Expensing of exploration and development costs, oil and gas 170 110 70 40 30 50 70 70 70 70 60 640

10 Expensing of exploration and development costs, coal 10 10 10 0 0 0 10 10 10 10 10 70

11 Excess of percentage over cost depletion, oil and gas 530 660 730 750 770 810 860 900 940 980 1,020 8,420

12 Excess of percentage over cost depletion, coal 30 40 50 50 50 50 50 50 50 60 60 510

13 Exception from passive loss limitation for working interests in oil and gas properties 0 0 0 0 0 0 0 0 0 0 0 0

14 Capital gains treatment of royalties on coal 0 0 0 0 0 0 0 0 0 0 0 0

15 Exclusion of interest on energy facility bonds 0 0 0 0 0 0 0 0 0 0 0 0

16 Enhanced oil recovery credit 380 230 190 140 40 0 0 0 0 0 0 600

17 Energy production credit 1/ 3,950 4,310 4,590 4,720 4,400 4,110 3,730 3,330 2,720 2,150 1,480 35,540

18 Marginal wells credit 240 160 70 20 0 0 0 0 0 0 0 250

19 Energy investment credit 1/ 6,720 8,680 10,210 7,610 5,730 4,730 3,400 3,140 2,890 3,550 3,430 53,370

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

21 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 10 10 0 0 0 0 0 0 0 0 0 10

22 Tax credits for clean-fuel burning vehicles and refueling property 468 482 457 459 445 420 381 353 337 320 291 3,944

23 Exclusion of utility conservation subsidies 0 0 0 0 0 0 0 0 0 0 0 0

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

25 Credit for investment in clean coal facilities 0 10 20 40 40 40 30 30 20 20 40 290

26 Amortize all geological and geophysical expenditures over 2 years 40 50 50 50 50 50 50 50 50 40 40 480

27 Allowance of deduction for certain energy efficient commercial building property 20 20 20 30 30 30 30 30 30 30 30 280

28 Credit for construction of new energy efficient homes 0 0 0 0 0 0 0 0 0 0 0 0

29 Credit for energy efficiency improvements to existing homes 0 0 0 0 0 0 0 0 0 0 0 0

30 Credit for residential energy efficient property 0 0 0 0 0 0 0 0 0 0 0 0

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

32 Advanced energy property credit 10 10 10 10 10 10 10 10 0 0 0 70

33 Advanced nuclear power production credit 0 60 180 220 240 270 280 280 280 230 100 2,140

34 Reduced tax rate for nuclear decommissioning funds 110 120 120 130 130 140 150 150 160 170 170 1,440

Natural resources and environment: 

35 Expensing of exploration and development costs, nonfuel minerals 20 10 10 0 0 0 10 10 10 10 10 70

36 Excess of percentage over cost depletion, nonfuel minerals 110 140 150 150 160 170 180 180 190 200 210 1,730

37 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 80 80 70 70 40 20 60 40 50 80 80 590

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

39 Expensing of multiperiod timber growing costs 110 110 120 120 120 130 130 140 140 150 150 1,310

40 Tax incentives for preservation of historic structures 460 530 630 710 750 770 770 770 780 780 790 7,280

41 Carbon oxide sequestration credit 360 310 370 570 740 1,890 2,470 2,740 5,760 7,660 7,790 30,300

42 Deduction for endangered species recovery expenditures 10 10 10 10 10 20 20 20 20 20 20 160

Agriculture: 

43 Expensing of certain capital outlays 10 10 10 10 10 10 10 10 10 10 10 100

44 Expensing of certain multiperiod production costs 10 10 10 10 10 20 20 20 20 20 20 160

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

46 Capital gains treatment of certain agriculture income 0 0 0 0 0 0 0 0 0 0 0 0

47 Income averaging for farmers 0 0 0 0 0 0 0 0 0 0 0 0

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

49 Expensing of reforestation expenditures 10 10 10 10 10 10 10 10 10 10 10 100

Commerce and housing: 

Financial institutions and insurance: 

50 Exemption of credit union income 3,070 2,910 2,960 3,110 3,310 3,480 3,590 3,700 3,850 3,880 3,930 34,720

51 Exclusion of life insurance death benefits 14,450 15,910 17,060 17,540 18,230 19,280 19,580 20,010 20,550 21,060 21,540 190,760

52 Exemption or special alternative tax for small property and casualty insurance companies 1,220 1,310 1,340 1,370 1,430 1,460 1,490 1,550 1,590 1,650 1,700 14,890

53 Tax exemption of insurance income earned by tax-exempt organizations 350 370 380 390 390 400 410 420 430 430 440 4,060

54 Exclusion of interest spread of financial institutions 0 0 0 0 0 0 0 0 0 0 0 0

Housing: 

55 Exclusion of interest on owner-occupied mortgage subsidy bonds 250 230 210 210 130 70 170 110 150 230 220 1,730

56 Exclusion of interest on rental housing bonds 470 420 390 390 240 140 310 210 280 420 410 3,210

57 Deductibility of mortgage interest on owner-occupied homes 0 0 0 0 0 0 0 0 0 0 0 0

58 Deductibility of State and local property tax on owner-occupied homes 17/0 0 0 0 0 0 0 0 0 0 0 0

59 Deferral of income from installment sales 0 0 0 0 0 0 0 0 0 0 0 0

60 Capital gains exclusion on home sales 0 0 0 0 0 0 0 0 0 0 0 0

61 Exclusion of net imputed rental income 0 0 0 0 0 0 0 0 0 0 0 0

62 Exception from passive loss rules for $25,000 of rental loss 0 0 0 0 0 0 0 0 0 0 0 0

63 Credit for low-income housing investments 10,720 10,020 9,870 9,840 9,920 10,210 10,510 10,820 11,130 11,440 11,770 105,530

64 Accelerated depreciation on rental housing (normal tax method) 40 30 20 30 30 40 40 50 50 60 70 420

65 Discharge of mortgage indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

66 Premiums for mortgage insurance deductible as interest 0 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

67 Discharge of business indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

68 Exceptions from imputed interest rules 0 0 0 0 0 0 0 0 0 0 0 0

69 Treatment of qualified dividends 0 0 0 0 0 0 0 0 0 0 0 0

Total from corporations

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2022-2032

(in millions of dollars)
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

70 Capital gains (except agriculture, timber, iron ore, and coal) 0 0 0 0 0 0 0 0 0 0 0 0

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

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

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

74 Ordinary income treatment of loss from small business corporation stock sale 0 0 0 0 0 0 0 0 0 0 0 0

75 Deferral of gains from like-kind exchanges 1,340 1,400 1,480 2,550 1,620 1,690 1,790 1,870 1,960 2,070 2,180 18,610

76 Depreciation of buildings other than rental housing (normal tax method) 460 50 -160 -180 -200 -220 -180 -110 -40 30 80 -930

77 Accelerated depreciation of machinery and equipment (normal tax method) 8,920 3,460 -3,950 -10,720 -15,320 -18,880 -14,560 -8,100 -4,160 -1,780 -310 -74,320

78 Expensing of certain small investments (normal tax method) -10 -30 230 530 700 830 710 510 390 330 290 4,490

79 Exclusion of interest on small issue bonds 70 70 70 70 70 70 80 80 80 80 80 750

80 Special rules for certain film and TV production 0 60 110 150 -230 -310 -150 -70 -30 -10 0 -480

81 Allow 20-percent deduction to certain pass-through income 0 0 0 0 0 0 0 0 0 0 0 0

Transportation: 

82 Tonnage tax 90 100 100 100 100 100 110 110 110 110 120 1,060

83 Deferral of tax on shipping companies 10 10 10 10 10 10 10 10 10 10 10 100

84 Exclusion of reimbursed employee parking expenses -1,218 -1,408 -1,461 -1,530 -1,599 -1,669 -1,747 -1,831 -1,867 -1,905 -1,943 -16,960

85 Exclusion for employer-provided transit passes -406 -461 -489 -526 -562 -604 -647 -694 -707 -721 -735 -6,146

86 Tax credit for certain expenditures for maintaining railroad tracks 110 80 50 40 30 20 20 10 10 10 0 270

87 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 40 30 30 30 30 30 20 20 20 20 70 300

Community and regional development: 

88 Exclusion of interest for airport, dock, and similar bonds 300 270 250 250 150 90 200 130 180 270 270 2,060

89 Exemption of certain mutuals' and cooperatives' income 100 100 100 110 110 110 110 110 120 120 120 1,110

90 Empowerment zones 70 70 70 80 60 40 30 20 20 20 20 430

91 New markets tax credit 1,150 1,190 1,230 1,280 1,330 1,310 1,200 1,040 850 630 400 10,460

92 Credit to holders of Gulf Tax Credit Bonds. 30 30 20 20 10 10 10 10 10 10 10 140

93 Recovery Zone Bonds 6/ 30 30 20 20 10 10 10 10 10 10 10 140

94 Tribal Economic Development Bonds 0 0 0 0 0 0 0 0 0 0 0 0

95 Opportunity Zones 560 390 370 360 -2,040 -1,390 130 170 210 250 280 -1,270

96 Disaster Employee Retention Credit 90 110 50 50 40 30 30 20 20 20 10 380

Education, training, employment, and social services: 

Education: 

97 Exclusion of scholarship and fellowship income (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

98 Tax credits and deductions for postsecondary education expenses 7/ 0 0 0 0 0 0 0 0 0 0 0 0

99 Deductibility of student-loan interest 0 0 0 0 0 0 0 0 0 0 0 0

100 Qualified tuition programs (includes Education IRA) 0 0 0 0 0 0 0 0 0 0 0 0

101 Exclusion of interest on student-loan bonds 40 40 40 40 20 10 30 20 30 40 40 310

102 Exclusion of interest on bonds for private nonprofit educational facilities 660 600 550 550 330 190 430 290 400 600 580 4,520

103 Credit for holders of zone academy bonds 8/ 110 90 80 60 50 50 40 40 40 30 30 510

104 Exclusion of interest on savings bonds redeemed to finance educational expenses 0 0 0 0 0 0 0 0 0 0 0 0

105 Parental personal exemption for students age 19 or over 0 0 0 0 0 0 0 0 0 0 0 0

106 Deductibility of charitable contributions (education) 830 870 920 960 1,010 1,040 1,080 1,120 1,170 1,230 1,290 10,690

107 Exclusion of employer-provided educational assistance 0 0 0 0 0 0 0 0 0 0 0 0

108 Special deduction for teacher expenses 0 0 0 0 0 0 0 0 0 0 0 0

109 Discharge of student loan indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

110 Qualified school construction bonds 9/ 130 120 120 110 100 100 90 80 80 70 60 930

Training, employment, and social services: 

111 Work opportunity tax credit 1,270 1,310 1,350 1,390 870 390 270 210 160 120 90 6,160

112 Employer provided child care exclusion 0 0 0 0 0 0 0 0 0 0 0 0

113 Employer-provided child care credit 20 20 20 20 20 20 20 30 30 30 30 240

114 Assistance for adopted foster children 0 0 0 0 0 0 0 0 0 0 0 0

115 Adoption credit and exclusion 0 0 0 0 0 0 0 0 0 0 0 0

116 Exclusion of employee meals and lodging (other than military) -110 -450 -690 -720 -750 -780 -810 -840 -880 -920 -960 -7,800

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

118 Credit for disabled access expenditures 0 0 0 0 0 0 0 0 0 0 0 0

119 Deductibility of charitable contributions, other than education and health1,390 1,440 1,490 1,550 1,630 1,690 1,750 1,820 1,890 1,960 2,040 17,260

120 Exclusion of certain foster care payments 0 0 0 0 0 0 0 0 0 0 0 0

121 Exclusion of parsonage allowances 0 0 0 0 0 0 0 0 0 0 0 0

122 Indian employment credit 30 10 10 10 10 10 10 0 0 0 0 60

Health: 

123 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 0 0 0 0 0 0 0 0 0 0 0 0

124 Self-employed medical insurance premiums 0 0 0 0 0 0 0 0 0 0 0 0

125 Medical Savings Accounts / Health Savings Accounts 0 0 0 0 0 0 0 0 0 0 0 0

126 Deductibility of medical expenses 0 0 0 0 0 0 0 0 0 0 0 0

127 Exclusion of interest on hospital construction bonds 900 820 760 750 460 270 590 400 550 820 800 6,220

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

129 Credit for employee health insurance expenses of small business 10 10 0 0 0 0 0 0 0 0 0 10

130 Deductibility of charitable contributions (health) 4,550 4,770 5,000 5,230 5,460 5,690 5,940 6,180 6,440 6,690 6,950 58,350

131 Tax credit for orphan drug research 1,960 2,290 2,670 3,110 3,630 4,240 4,950 5,780 6,750 7,880 9,200 50,500

132 Special Blue Cross/Blue Shield tax benefits 320 370 380 400 420 440 460 490 530 570 610 4,670

133 Distributions from retirement plans for premiums for health and long-term care insurance 0 0 0 0 0 0 0 0 0 0 0 0

134 Credit for family and sick leave taken by self-employed individuals 12/ 0 0 0 0 0 0 0 0 0 0 0 0

Income security: 

135 Child tax credit 13/ 0 0 0 0 0 0 0 0 0 0 0 0

136 Exclusion of railroad retirement (Social Security equivalent) benefits 0 0 0 0 0 0 0 0 0 0 0 0

137 Exclusion of workers' compensation benefits 0 0 0 0 0 0 0 0 0 0 0 0

138 Exclusion of public assistance benefits (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

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

140 Exclusion of military disability pensions 0 0 0 0 0 0 0 0 0 0 0 0 Net exclusion of pension contributions and earnings: 0 0 0 0 0 0 0 0 0 0 0 0

141 Defined benefit employer plans 0 0 0 0 0 0 0 0 0 0 0 0

142 Defined contribution employer plans 0 0 0 0 0 0 0 0 0 0 0 0

143 Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

144 Low and moderate income savers credit 0 0 0 0 0 0 0 0 0 0 0 0

145 Self-Employed plans 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of other employee benefits: 

146 Premiums on group term life insurance 0 0 0 0 0 0 0 0 0 0 0 0

147 Premiums on accident and disability insurance 0 0 0 0 0 0 0 0 0 0 0 0

148 Income of trusts to finance supplementary unemployment benefits 0 0 0 0 0 0 0 0 0 0 0 0

149 Income of trusts to finance voluntary employee benefits associations 1,240 1,310 1,400 1,490 1,670 1,730 1,820 1,920 2,010 2,110 2,210 17,670

150 Special ESOP rules 180 190 190 200 200 210 210 220 230 230 240 2,120

151 Additional deduction for the blind 0 0 0 0 0 0 0 0 0 0 0 0

152 Additional deduction for the elderly 0 0 0 0 0 0 0 0 0 0 0 0

153 Deductibility of casualty losses 0 0 0 0 0 0 0 0 0 0 0 0

154 Earned income tax credit 14/ 0 0 0 0 0 0 0 0 0 0 0 0

155 Recovery rebate credits 15/ 0 0 0 0 0 0 0 0 0 0 0 0
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

Social Security: 

Exclusion of social security benefits: 0 0 0 0 0 0 0 0 0 0 0 0

156 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 0 0 0 0 0 0 0 0 0 0 0 0

157 Credit for certain employer contributions to Social Security 220 240 250 260 270 280 290 300 310 320 330 2,850

Veterans benefits and services: 

158 Exclusion of veterans death benefits and disability compensation 0 0 0 0 0 0 0 0 0 0 0 0

159 Exclusion of veterans pensions 0 0 0 0 0 0 0 0 0 0 0 0

160 Exclusion of GI bill benefits 0 0 0 0 0 0 0 0 0 0 0 0

161 Exclusion of interest on veterans housing bonds 20 20 20 20 10 10 20 10 10 20 20 160

General purpose fiscal assistance: 

162 Exclusion of interest on public purpose State and local bonds 8,610 7,830 7,220 7,200 4,350 2,540 5,650 3,850 5,260 7,810 7,640 59,350

163 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

164 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 17/ 0 0 0 0 0 0 0 0 0 0 0 0

Interest: 

165 Deferral of interest on U.S. savings bonds 0 0 0 0 0 0 0 0 0 0 0 0

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of interest on State and local bonds for: 

Public purposes 8,610 7,830 7,220 7,200 4,350 2,540 5,650 3,850 5,260 7,810 7,640 59,350

Energy facilities 0 0 0 0 0 0 0 0 0 0 0 0

80 80 70 70 40 20 60 40 50 80 80 590

Small-issues 70 70 70 70 70 70 80 80 80 80 80 750

Owner-occupied mortgage subsidies 880 910 860 850 900 960 980 980 1,000 990 1,060 9,490

Rental housing 1,620 1,670 1,590 1,560 1,660 1,760 1,790 1,800 1,840 1,810 1,950 17,430

Airports, docks, and similar facilities 1,050 1,080 1,030 1,010 1,070 1,140 1,160 1,170 1,190 1,170 1,260 11,280

Student loans 150 160 150 150 160 170 170 170 170 170 180 1,650

Private nonprofit educational facilities 2,300 2,360 2,240 2,200 2,350 2,490 2,540 2,550 2,600 2,570 2,750 24,650

Hospital construction 3,140 3,230 3,070 3,010 3,220 3,410 3,470 3,490 3,550 3,510 3,770 33,730

Veterans' housing 80 80 80 80 80 90 90 90 90 90 100 870

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 
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023-33

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 14,830 15,380 15,970 16,600 15,370 15,560 16,130 16,840 17,620 18,450 19,350 167,270

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,700 7,160 7,560 7,950 8,360 8,790 9,250 9,740 10,250 10,780 11,340 91,180

3 Exclusion of certain allowances for Federal employees abroad 260 280 290 310 320 340 360 380 400 420 450 3,550

4 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 200 220 230 250 220 210 210 220 220 230 230 2,240

5 Deduction for foreign-derived intangible income derived from trade or business within the United States 0 0 0 0 0 0 0 0 0 0 0 0

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 1,140 1,780 1,880 1,980 2,190 2,410 2,570 2,690 2,820 2,950 3,110 24,380

General science, space, and technology: 

7 Expensing of research and experimentation expenditures (normal tax method) -1,370 -5,580 -4,130 -2,650 -1,110 0 0 0 0 0 0 -13,470

8 Credit for increasing research activities 2,150 2,320 2,470 2,630 2,790 2,960 3,140 3,330 3,540 3,770 4,010 30,960

Energy: 

9 Expensing of exploration and development costs, oil and gas 550 360 230 140 130 190 260 280 270 260 240 2,360

10 Expensing of exploration and development costs, coal 50 30 20 10 10 20 20 20 20 20 20 190

11 Excess of percentage over cost depletion, oil and gas 380 380 370 380 410 450 480 510 530 550 570 4,630

12 Excess of percentage over cost depletion, coal 20 20 30 30 30 30 30 30 30 30 30 290

13 Exception from passive loss limitation for working interests in oil and gas properties 10 10 10 10 10 10 10 10 10 10 10 100

14 Capital gains treatment of royalties on coal 50 50 50 50 60 60 60 70 70 70 70 610

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

16 Enhanced oil recovery credit 10 10 10 0 0 0 0 0 0 0 0 20

17 Energy production credit 1/ 210 230 240 250 230 220 200 180 140 110 80 1,880

18 Marginal wells credit 40 30 10 0 0 0 0 0 0 0 0 40

19 Energy investment credit 1/ 620 810 950 710 530 440 310 290 260 340 330 4,970

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

21 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 20 10 0 0 0 0 0 0 0 0 0 10

22 Tax credits for clean-fuel burning vehicles and refueling property 614 595 548 498 472 410 388 401 412 370 300 4,393

23 Exclusion of utility conservation subsidies 50 50 50 40 40 40 30 30 30 30 20 360

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

25 Credit for investment in clean coal facilities 0 0 0 0 0 0 0 0 0 0 0 0

26 Amortize all geological and geophysical expenditures over 2 years 80 90 100 100 100 100 100 90 90 80 80 930

27 Allowance of deduction for certain energy efficient commercial building property 140 120 120 120 130 140 140 140 140 140 140 1,330

28 Credit for construction of new energy efficient homes 120 100 100 100 100 60 20 10 0 0 0 490

29 Credit for energy efficiency improvements to existing homes 450 0 0 0 0 0 0 0 0 0 0 0

30 Credit for residential energy efficient property 2,700 2,380 680 220 0 0 0 0 0 0 0 3,280

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

32 Advanced energy property credit 0 0 0 0 0 0 0 0 0 0 0 0

33 Advanced nuclear power production credit 0 0 0 0 0 0 0 0 0 0 0 0

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

Natural resources and environment: 

35 Expensing of exploration and development costs, nonfuel minerals 50 30 20 10 10 20 20 30 30 20 20 210

36 Excess of percentage over cost depletion, nonfuel minerals 80 80 80 80 90 90 100 100 110 110 120 960

37 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 290 300 290 280 300 320 330 330 330 330 350 3,160

38 Capital gains treatment of certain timber income 150 160 160 170 180 200 210 220 230 240 250 2,020

39 Expensing of multiperiod timber growing costs 120 130 140 140 150 160 170 180 190 200 200 1,660

40 Tax incentives for preservation of historic structures 120 130 160 180 200 200 200 200 200 210 190 1,870

41 Carbon oxide sequestration credit 0 0 0 0 0 0 0 0 0 0 0 0

42 Deduction for endangered species recovery expenditures 20 20 30 30 30 40 40 40 50 50 60 390

Agriculture: 

43 Expensing of certain capital outlays 110 110 110 120 140 150 160 170 180 180 190 1,510

44 Expensing of certain multiperiod production costs 250 250 250 260 320 350 370 380 400 410 430 3,420

45 Treatment of loans forgiven for solvent farmers 60 60 60 60 70 70 70 70 70 70 70 670

46 Capital gains treatment of certain agriculture income 1,500 1,580 1,600 1,670 1,830 1,980 2,060 2,160 2,260 2,360 2,470 19,970

47 Income averaging for farmers 200 210 210 220 230 230 230 230 230 230 230 2,250

48 Deferral of gain on sale of farm refiners 15 15 20 20 20 20 20 20 25 25 25 210

49 Expensing of reforestation expenditures 50 50 60 60 70 70 70 70 70 70 80 670

Commerce and housing: 

Financial institutions and insurance: 

50 Exemption of credit union income 0 0 0 0 0 0 0 0 0 0 0 0

51 Exclusion of life insurance death benefits 1,570 1,650 1,700 1,730 1,770 1,810 1,850 1,890 1,930 1,980 2,020 18,330

52 Exemption or special alternative tax for small property and casualty insurance companies 0 0 0 0 0 0 0 0 0 0 0 0

53 Tax exemption of insurance income earned by tax-exempt organizations 0 0 0 0 0 0 0 0 0 0 0 0

54 Exclusion of interest spread of financial institutions 7,330 8,670 7,790 7,620 7,990 8,200 8,170 8,310 8,440 8,540 8,660 82,390

Housing: 

55 Exclusion of interest on owner-occupied mortgage subsidy bonds 880 910 860 850 900 960 980 980 1,000 990 1,060 9,490

56 Exclusion of interest on rental housing bonds 1,620 1,670 1,590 1,560 1,660 1,760 1,790 1,800 1,840 1,810 1,950 17,430

57 Deductibility of mortgage interest on owner-occupied homes 34,430 35,660 36,820 38,730 107,230 113,890 120,340 127,360 134,670 142,440 149,370 1,006,510

58 Deductibility of State and local property tax on owner-occupied homes 17/ 5,110 7,420 7,290 7,440 41,360 60,900 64,490 67,960 71,660 75,640 79,860 484,020

59 Deferral of income from installment sales 1,720 1,700 1,720 1,780 1,850 1,920 2,000 2,090 2,180 2,270 2,370 19,880

60 Capital gains exclusion on home sales 49,200 50,540 52,260 54,120 61,890 64,490 67,140 69,540 72,520 75,730 78,840 647,070

61 Exclusion of net imputed rental income 128,950 133,660 134,950 135,950 163,430 169,360 175,230 181,470 188,130 195,360 202,010 1,679,550

62 Exception from passive loss rules for $25,000 of rental loss 4,970 5,120 5,260 5,590 6,130 6,280 6,410 6,580 6,740 6,890 7,040 62,040

63 Credit for low-income housing investments 560 530 520 520 520 540 550 570 590 600 620 5,560

64 Accelerated depreciation on rental housing (normal tax method) 3,450 2,530 2,540 3,230 4,140 5,040 5,880 6,740 7,370 7,990 8,570 54,030

65 Discharge of mortgage indebtedness 380 320 330 340 0 0 0 0 0 0 0 990

66 Premiums for mortgage insurance deductible as interest 150 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

67 Discharge of business indebtedness 40 70 50 40 40 30 40 40 40 40 60 450

68 Exceptions from imputed interest rules 30 50 60 60 70 70 80 80 80 80 80 710

69 Treatment of qualified dividends 33,290 34,830 36,440 38,140 41,880 45,600 47,430 49,500 51,660 53,890 56,230 455,600

Total from individuals

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2022-2032

(in millions of dollars)
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

70 Capital gains (except agriculture, timber, iron ore, and coal) 112,050 118,340 119,820 124,780 136,680 148,170 154,180 161,180 168,490 176,240 184,520 1,492,400

71 Capital gains exclusion of small corporation stock 1,680 1,770 1,850 1,930 2,000 2,070 2,150 2,240 2,330 2,430 2,530 21,300

72 Step-up basis of capital gains at death 46,750 49,240 51,860 53,570 56,430 61,630 65,950 70,340 75,400 80,860 86,810 652,090

73 Carryover basis of capital gains on gifts 2,700 2,960 3,310 3,830 4,020 4,490 4,890 4,700 4,630 4,620 4,920 42,370

74 Ordinary income treatment of loss from small business corporation stock sale 70 70 80 80 80 90 90 90 100 100 110 890

75 Deferral of gains from like-kind exchanges 2,490 2,620 2,750 2,880 3,949 3,180 3,340 3,510 3,680 3,870 4,060 33,839

76 Depreciation of buildings other than rental housing (normal tax method) 2,260 440 -310 -290 -280 -430 -280 100 350 670 990 960

77 Accelerated depreciation of machinery and equipment (normal tax method) 13,860 2,640 -4,270 -7,840 -13,140 -20,170 -15,740 -7,730 -3,130 -210 1,780 -67,810

78 Expensing of certain small investments (normal tax method) -900 4,330 8,010 9,800 12,400 15,590 14,440 12,020 10,690 10,050 9,840 107,170

79 Exclusion of interest on small issue bonds 250 230 210 210 130 70 170 110 150 230 220 1,730

80 Special rules for certain film and TV production 0 40 70 90 -160 -220 -110 -50 -20 -10 0 -370

81 Allow 20-percent deduction to certain pass-through income 51,070 50,230 50,770 53,010 21,720 0 0 0 0 0 0 175,730

Transportation: 

82 Tonnage tax 0 0 0 0 0 0 0 0 0 0 0 0

83 Deferral of tax on shipping companies 0 0 0 0 0 0 0 0 0 0 0 0

84 Exclusion of reimbursed employee parking expenses 2,925 3,474 3,585 3,723 3,903 4,082 4,268 4,472 4,689 4,916 5,155 42,267

85 Exclusion for employer-provided transit passes 747 868 917 976 1,052 1,126 1,210 1,297 1,393 1,495 1,605 11,939

86 Tax credit for certain expenditures for maintaining railroad tracks 60 50 30 20 10 10 10 10 0 0 0 140

87 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 120 110 110 100 100 90 90 90 80 80 70 920

Community and regional development: 

88 Exclusion of interest for airport, dock, and similar bonds 1,050 1,080 1,030 1,010 1,070 1,140 1,160 1,170 1,190 1,170 1,260 11,280

89 Exemption of certain mutuals' and cooperatives' income 0 0 0 0 0 0 0 0 0 0 0 0

90 Empowerment zones 20 20 20 30 30 20 10 0 0 0 0 130

91 New markets tax credit 20 20 20 30 30 30 30 20 20 10 10 220

92 Credit to holders of Gulf Tax Credit Bonds. 120 110 100 90 80 80 70 70 60 50 40 750

93 Recovery Zone Bonds 6/ 100 100 90 80 80 70 70 60 50 40 40 680

94 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 20 110

95 Opportunity Zones 3,180 1,690 1,790 1,630 -4,360 -11,010 540 710 920 1,070 1,270 -5,750

96 Disaster Employee Retention Credit 20 30 10 10 10 10 10 10 10 0 0 100

Education, training, employment, and social services: 

Education: 

97 Exclusion of scholarship and fellowship income (normal tax method) 4,110 4,230 4,460 4,720 5,270 6,090 6,430 6,780 7,160 7,540 7,960 60,640

98 Tax credits and deductions for postsecondary education expenses 7/ 15,460 14,820 14,580 14,380 14,270 14,250 13,970 13,680 13,380 13,030 12,660 139,020

99 Deductibility of student-loan interest 2,340 2,230 2,350 2,470 2,640 3,010 3,040 3,140 3,160 3,170 3,260 28,470

100 Qualified tuition programs (includes Education IRA) 2,790 2,960 3,280 3,730 4,550 5,470 6,550 7,980 9,860 12,370 15,700 72,450

101 Exclusion of interest on student-loan bonds 150 160 150 150 160 170 170 170 170 170 180 1,650

102 Exclusion of interest on bonds for private nonprofit educational facilities 2,300 2,360 2,240 2,200 2,350 2,490 2,540 2,550 2,600 2,570 2,750 24,650

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

104 Exclusion of interest on savings bonds redeemed to finance educational expenses 40 40 40 40 50 50 50 50 50 50 60 480

105 Parental personal exemption for students age 19 or over 1,910 2,930 2,890 2,770 4,650 5,580 5,490 5,420 5,320 5,160 5,050 45,260

106 Deductibility of charitable contributions (education) 6,440 6,860 7,250 7,640 9,250 12,180 12,740 13,360 13,550 13,740 13,940 110,510

107 Exclusion of employer-provided educational assistance 1,510 1,630 1,730 1,840 1,630 1,530 1,610 1,680 1,760 1,850 1,930 17,190

108 Special deduction for teacher expenses 180 180 180 180 190 210 210 210 210 220 220 2,010

109 Discharge of student loan indebtedness 80 90 110 120 140 170 190 210 230 260 290 1,810

110 Qualified school construction bonds 9/ 390 370 350 330 310 290 270 250 240 220 200 2,830

Training, employment, and social services: 

111 Work opportunity tax credit 460 480 490 510 400 130 80 60 50 30 30 2,260

112 Employer provided child care exclusion 550 740 810 860 1,110 1,250 1,300 1,360 1,430 1,510 1,580 11,950

113 Employer-provided child care credit 0 0 0 0 0 0 0 0 10 10 10 30

114 Assistance for adopted foster children 670 810 940 1,020 1,100 1,210 1,330 1,460 1,600 1,770 1,960 13,200

115 Adoption credit and exclusion 870 900 920 930 940 950 960 970 980 990 990 9,530

116 Exclusion of employee meals and lodging (other than military) 6,550 7,250 7,370 7,560 8,830 9,600 9,880 10,200 10,530 10,880 11,250 93,350

117 Credit for child and dependent care expenses 5,850 3,570 3,720 3,820 3,920 3,980 4,040 4,090 4,140 4,200 4,280 39,760

118 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

119 Deductibility of charitable contributions, other than education and health54,110 57,420 60,760 64,000 77,440 101,870 106,680 111,720 117,000 122,530 128,130 947,550

120 Exclusion of certain foster care payments 480 570 660 710 790 860 940 1,030 1,130 1,250 1,390 9,330

121 Exclusion of parsonage allowances 970 1,020 1,070 1,130 1,190 1,260 1,320 1,390 1,460 1,540 1,620 13,000

122 Indian employment credit 20 20 20 10 10 10 10 10 10 10 10 120

Health: 

123 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 224,520 237,400 252,430 266,010 308,280 338,270 354,440 372,310 391,600 412,050 433,530 3,366,320

124 Self-employed medical insurance premiums 8,200 8,440 8,840 9,580 11,860 13,560 14,430 15,230 15,960 16,780 17,690 132,370

125 Medical Savings Accounts / Health Savings Accounts 13,000 13,890 14,150 14,760 16,840 18,270 18,860 19,500 20,210 20,760 21,420 178,660

126 Deductibility of medical expenses 9,910 10,900 11,350 12,170 18,390 22,760 24,640 26,630 28,700 30,900 33,280 219,720

127 Exclusion of interest on hospital construction bonds 3,140 3,230 3,070 3,010 3,220 3,410 3,470 3,490 3,550 3,510 3,770 33,730

128 Refundable Premium Assistance Tax Credit 11/ 14,730 9,830 7,380 8,330 9,570 9,930 10,570 11,540 11,900 12,400 13,110 104,560

129 Credit for employee health insurance expenses of small business 30 20 10 10 0 0 0 0 0 0 0 40

130 Deductibility of charitable contributions (health) 6,020 6,400 6,770 7,120 8,630 11,340 11,880 12,440 13,030 13,640 14,260 105,510

131 Tax credit for orphan drug research 10 10 10 10 10 10 10 10 10 20 20 120

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

133 Distributions from retirement plans for premiums for health and long-term care insurance 460 470 490 500 590 630 650 660 670 670 680 6,010

134 Credit for family and sick leave taken by self-employed individuals 12/ 2,790 760 0 0 0 0 0 0 0 0 0 760

Income security: 

135 Child tax credit 13/ 66,840 67,520 68,130 48,680 18,760 18,310 17,890 17,460 17,040 16,640 16,440 306,870

136 Exclusion of railroad retirement (Social Security equivalent) benefits 300 260 240 220 220 210 180 150 120 90 50 1,740

137 Exclusion of workers' compensation benefits 9,020 9,030 9,040 9,040 9,050 9,060 9,070 9,080 9,080 9,090 9,100 90,640

138 Exclusion of public assistance benefits (normal tax method) 670 670 660 690 730 760 800 820 810 860 880 7,680

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

140 Exclusion of military disability pensions 180 180 180 190 210 230 230 240 250 250 260 2,220

Net exclusion of pension contributions and earnings: 

141 Defined benefit employer plans 69,340 69,560 69,950 69,340 77,660 76,780 76,650 76,270 76,350 75,110 74,180 741,850

142 Defined contribution employer plans 106,710 115,490 117,830 122,100 146,190 153,200 160,100 167,700 176,330 184,010 192,750 1,535,700

143 Individual Retirement Accounts 23,600 24,430 25,020 26,630 32,940 35,690 38,310 40,540 43,380 46,430 49,560 362,930

144 Low and moderate income savers credit 1,260 1,380 1,440 1,460 1,570 1,540 1,520 1,490 1,450 1,440 1,410 14,700

145 Self-Employed plans 34,420 37,250 38,000 39,380 47,150 49,410 51,640 54,090 56,870 59,350 62,170 495,310

Exclusion of other employee benefits: 

146 Premiums on group term life insurance 3,330 3,390 3,480 3,590 4,090 4,360 4,500 4,650 4,810 4,970 5,130 42,970

147 Premiums on accident and disability insurance 340 340 350 350 350 350 350 350 350 350 360 3,500

148 Income of trusts to finance supplementary unemployment benefits 20 30 40 40 40 40 50 50 50 50 50 440

149 Income of trusts to finance voluntary employee benefits associations 0 0 0 0 0 0 0 0 0 0 0 0

150 Special ESOP rules 30 30 30 30 30 30 30 40 40 40 40 340

151 Additional deduction for the blind 40 40 50 50 40 50 50 50 60 60 60 510

152 Additional deduction for the elderly 6,300 6,920 7,430 7,970 6,580 7,030 7,540 7,940 8,490 9,050 9,640 78,590

153 Deductibility of casualty losses 0 0 0 0 720 1,090 1,130 1,170 1,220 1,290 1,350 7,970

154 Earned income tax credit 14/ 2,410 2,700 3,010 3,230 3,340 5,030 5,200 5,340 5,540 5,690 5,890 44,970

155 Recovery rebate credits 15/ 19,320 770 0 0 0 0 0 0 0 0 0 770
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

Social Security: 

Exclusion of social security benefits: 

156 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 29,760 31,350 31,730 31,870 36,830 42,970 44,940 47,000 49,070 51,160 53,450 420,370

157 Credit for certain employer contributions to Social Security 950 1,060 1,140 1,220 1,300 1,380 1,460 1,540 1,620 1,700 1,780 14,200

Veterans benefits and services: 

158 Exclusion of veterans death benefits and disability compensation 10,430 11,260 11,780 12,050 12,980 14,680 15,270 15,870 16,490 17,140 17,830 145,350

159 Exclusion of veterans pensions 250 220 210 200 210 220 220 220 220 210 210 2,140

160 Exclusion of GI bill benefits 1,540 1,500 1,510 1,530 1,630 1,820 1,880 1,930 1,980 2,040 2,100 17,920

161 Exclusion of interest on veterans housing bonds 80 80 80 80 80 90 90 90 90 90 100 870

General purpose fiscal assistance: 

162 Exclusion of interest on public purpose State and local bonds 30,000 30,820 29,330 28,770 30,720 32,550 33,150 33,350 33,960 33,570 36,000 322,220

163 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

164 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 17/ 5,750 8,200 7,950 7,980 90,040 127,850 131,020 138,470 146,370 155,060 164,400 977,340

Interest: 

165 Deferral of interest on U.S. savings bonds 830 820 810 800 800 790 780 770 760 750 750 7,830

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 5,110 7,420 7,290 7,440 41,360 60,900 64,490 67,960 71,660 75,640 79,860 484,020

5,750 8,200 7,950 7,980 90,040 127,850 131,020 138,470 146,370 155,060 164,400 977,340

Exclusion of interest on State and local bonds for: 

Public purposes 30,000 30,820 29,330 28,770 30,720 32,550 33,150 33,350 33,960 33,570 36,000 322,220

Energy facilities 10 10 10 10 10 10 10 10 10 10 10 100

290 300 290 280 300 320 330 330 330 330 350 3,160

Small-issues 20 20 20 20 10 10 10 10 10 20 20 150

Owner-occupied mortgage subsidies 250 230 210 210 130 70 170 110 150 230 220 1,730

Rental housing 470 420 390 390 240 140 310 210 280 420 410 3,210

Airports, docks, and similar facilities 300 270 250 250 150 90 200 130 180 270 270 2,060

Student loans 40 40 40 40 20 10 30 20 30 40 40 310

Private nonprofit educational facilities 660 600 550 550 330 190 430 290 400 600 580 4,520

Hospital construction 900 820 760 750 460 270 590 400 550 820 800 6,220

Veterans' housing 20 20 20 20 10 10 20 10 10 20 20 160

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 
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

(in millions of dollars)

Provision 2022 2023 2023-32

123 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 224,520 237,400 3,366,320

61 Exclusion of net imputed rental income 128,950 133,660 1,679,550

142 Defined contribution employer plans 106,710 115,490 1,535,700

70 Capital gains (except agriculture, timber, iron ore, and coal) 112,050 118,340 1,492,400

57 Deductibility of mortgage interest on owner-occupied homes 34,430 35,660 1,006,510

164 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 17/ 5,750 8,200 977,340

119 Deductibility of charitable contributions, other than education and health 55,500 58,860 964,810

141 Defined benefit employer plans 69,340 69,560 741,850

72 Step-up basis of capital gains at death 46,750 49,240 652,090

60 Capital gains exclusion on home sales 49,200 50,540 647,070

145 Self-Employed plans 34,420 37,250 495,310

58 Deductibility of State and local property tax on owner-occupied homes 17/ 5,110 7,420 484,020

69 Treatment of qualified dividends 33,290 34,830 455,600

156 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 29,760 31,350 420,370

162 Exclusion of interest on public purpose State and local bonds 38,610 38,650 381,570

143 Individual Retirement Accounts 23,600 24,430 362,930

4 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 30,540 32,840 335,910

8 Credit for increasing research activities 23,260 24,980 321,230

135 Child tax credit 13/ 66,840 67,520 306,870

126 Deductibility of medical expenses 9,910 10,900 219,720

51 Exclusion of life insurance death benefits 16,020 17,560 209,090

125 Medical Savings Accounts / Health Savings Accounts 13,000 13,890 178,660

81 Allow 20-percent deduction to certain pass-through income 51,070 50,230 175,730

1 Exclusion of benefits and allowances to armed forces personnel 14,830 15,380 167,270

130 Deductibility of charitable contributions (health) 10,570 11,170 163,860

158 Exclusion of veterans death benefits and disability compensation 10,430 11,260 145,350

98 Tax credits and deductions for postsecondary education expenses 6/ 15,460 14,820 139,020

124 Self-employed medical insurance premiums 8,200 8,440 132,370

106 Deductibility of charitable contributions (education) 7,270 7,730 121,200

7 Expensing of research and experimentation expenditures (normal tax method) -910 4,300 111,660

78 Expensing of certain small investments (normal tax method) -910 4,300 111,660

5 Deduction for foreign-derived intangible income derived from trade or business within the United States 11,900 12,790 111,410

63 Credit for low-income housing investments 11,280 10,550 111,090

128 Refundable Premium Assistance Tax Credit 11/ 14,730 9,830 104,560

2 Exclusion of income earned abroad by U.S. citizens 6,700 7,160 91,180

137 Exclusion of workers' compensation benefits 9,020 9,030 90,640

116 Exclusion of employee meals and lodging (other than military) 6,440 6,800 85,550

54 Exclusion of interest spread of financial institutions 7,330 8,670 82,390

152 Additional deduction for the elderly 6,300 6,920 78,590

100 Qualified tuition programs (includes Education IRA) 2,790 2,960 72,450

62 Exception from passive loss rules for $25,000 of rental loss 4,970 5,120 62,040

97 Exclusion of scholarship and fellowship income (normal tax method) 4,110 4,230 60,640

19 Energy investment credit 7,340 9,490 58,340

64 Accelerated depreciation on rental housing (normal tax method) 3,490 2,560 54,450

75 Deferral of gains from like-kind exchanges 3,830 4,020 52,449

131 Tax credit for orphan drug research 1,970 2,300 50,620

105 Parental personal exemption for students age 19 or over 1,910 2,930 45,260

154 Earned income tax credit 14/ 2,410 2,700 44,970

146 Premiums on group term life insurance 3,330 3,390 42,970

73 Carryover basis of capital gains on gifts 2,700 2,960 42,370

127 Exclusion of interest on hospital construction bonds 4,040 4,050 39,950

117 Credit for child and dependent care expenses 9/ 5,850 3,570 39,760

17 Energy production credit 4,160 4,540 37,420

50 Exemption of credit union income 3,070 2,910 34,720

41 Carbon oxide sequestration credit 356 306 30,300

102 Exclusion of interest on bonds for private nonprofit educational facilities 2,960 2,960 29,170

99 Deductibility of student-loan interest 2,340 2,230 28,470

84 Exclusion of reimbursed employee parking expenses 1,707 2,066 25,307

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 1,140 1,780 24,380

71 Capital gains exclusion of small corporation stock 1,680 1,770 21,300

56 Exclusion of interest on rental housing bonds 2,090 2,090 20,640

46 Capital gains treatment of certain agriculture income 1,500 1,580 19,970

59 Deferral of income from installment sales 1,720 1,700 19,880

160 Exclusion of GI bill benefits 1,540 1,500 17,920

149 Income of trusts to finance voluntary employee benefits associations 1,240 1,310 17,670

107 Exclusion of employer-provided educational assistance 1,510 1,630 17,190

157 Credit for certain employer contributions to Social Security 1,170 1,300 17,050

52 Exemption or special alternative tax for small property and casualty insurance companies 1,220 1,310 14,890

144 Low and moderate income savers credit 1,260 1,380 14,700

88 Exclusion of interest for airport, dock, and similar bonds 1,350 1,350 13,340

114 Assistance for adopted foster children 670 810 13,200

11 Excess of percentage over cost depletion, oil and gas 910 1,040 13,050

121 Exclusion of parsonage allowances 970 1,020 13,000

112 Employer provided child care exclusion 550 740 11,950

55 Exclusion of interest on owner-occupied mortgage subsidy bonds 1,130 1,140 11,220

91 New markets tax credit 1,170 1,210 10,680

115 Adoption credit and exclusion 870 900 9,530

120 Exclusion of certain foster care payments 480 570 9,330

40 Tax incentives for preservation of historic structures 580 660 9,150

111 Work opportunity tax credit 1,730 1,790 8,420

22 Tax credits for clean-fuel burning vehicles and refueling property 1,082 1,076 8,337

153 Deductibility of casualty losses 0 0 7,970

165 Deferral of interest on U.S. savings bonds 830 820 7,830

138 Exclusion of public assistance benefits (normal tax method) 670 670 7,680

133 Distributions from retirement plans for premiums for health and long-term care insurance 460 470 6,010

85 Exclusion for employer-provided transit passes 341 407 5,793

132 Special Blue Cross/Blue Shield tax benefits 320 370 4,670

FISCAL YEAR 2023-2032 PROJECTED REVENUE EFFECT

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

53 Tax exemption of insurance income earned by tax-exempt organizations 350 370 4,060

110 Qualified school construction bonds 8/ 520 490 3,760

37 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 370 380 3,750

44 Expensing of certain multiperiod production costs 260 260 3,580

3 Exclusion of certain allowances for Federal employees abroad 260 280 3,550

147 Premiums on accident and disability insurance 340 340 3,500

30 Credit for residential energy efficient property 2,700 2,380 3,280

9 Expensing of exploration and development costs, oil and gas 720 470 3,000

39 Expensing of multiperiod timber growing costs 230 240 2,970

36 Excess of percentage over cost depletion, nonfuel minerals 190 220 2,690

79 Exclusion of interest on small issue bonds 320 300 2,480

150 Special ESOP rules 210 220 2,460

47 Income averaging for farmers 200 210 2,250

140 Exclusion of military disability pensions 180 180 2,220

33 Advanced nuclear power production credit 0 60 2,140

159 Exclusion of veterans pensions 250 220 2,140

38 Capital gains treatment of certain timber income 150 160 2,020

108 Special deduction for teacher expenses 180 180 2,010

101 Exclusion of interest on student-loan bonds 190 200 1,960

109 Discharge of student loan indebtedness 80 90 1,810

136 Exclusion of railroad retirement (Social Security equivalent) benefits 300 260 1,740

27 Allowance of deduction for certain energy efficient commercial building property 160 140 1,610

43 Expensing of certain capital outlays 120 120 1,610

34 Reduced tax rate for nuclear decommissioning funds 110 120 1,440

26 Amortize all geological and geophysical expenditures over 2 years 120 140 1,410

87 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 160 140 1,220

89 Exemption of certain mutuals' and cooperatives' income 100 100 1,110

82 Tonnage tax 90 100 1,060

161 Exclusion of interest on veterans housing bonds 100 100 1,030

65 Discharge of mortgage indebtedness 380 320 990

74 Ordinary income treatment of loss from small business corporation stock sale 70 70 890

92 Credit to holders of Gulf Tax Credit Bonds. 150 140 890

93 Recovery Zone Bonds 5/ 130 130 820

12 Excess of percentage over cost depletion, coal 50 60 800

49 Expensing of reforestation expenditures 60 60 770

155 Recovery rebate credits 15/ 19,320 770 770

134 Credit for family and sick leave taken by self-employed individuals 12/ 2,790 760 760

68 Exceptions from imputed interest rules 30 50 710

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

45 Treatment of loans forgiven for solvent farmers 60 60 670

16 Enhanced oil recovery credit 390 240 620

14 Capital gains treatment of royalties on coal 50 50 610

90 Empowerment zones 90 90 560

42 Deduction for endangered species recovery expenditures 30 30 550

103 Credit for holders of zone academy bonds 7/ 110 90 510

151 Additional deduction for the blind 40 40 510

28 Credit for construction of new energy efficient homes 120 100 490

96 Disaster Employee Retention Credit 110 140 480

104 Exclusion of interest on savings bonds redeemed to finance educational expenses 40 40 480

67 Discharge of business indebtedness 40 70 450

148 Income of trusts to finance supplementary unemployment benefits 20 30 440

86 Tax credit for certain expenditures for maintaining railroad tracks 170 130 410

23 Exclusion of utility conservation subsidies 50 50 360

31 Qualified energy conservation bonds 4/ 30 30 300

18 Marginal wells credit 280 190 290

25 Credit for investment in clean coal facilities 0 10 290

35 Expensing of exploration and development costs, nonfuel minerals 70 40 280

113 Employer-provided child care credit 20 20 270

10 Expensing of exploration and development costs, coal 60 40 260

48 Deferral of gain on sale of farm refiners 15 15 210

122 Indian employment credit 50 30 180

139 Exclusion of special benefits for disabled coal miners 20 20 140

94 Tribal Economic Development Bonds 10 10 110

13 Exception from passive loss limitation for working interests in oil and gas properties 10 10 100

15 Exclusion of interest on energy facility bonds 10 10 100

83 Deferral of tax on shipping companies 10 10 100

118 Credit for disabled access expenditures 10 10 100

32 Advanced energy property credit 10 10 70

129 Credit for employee health insurance expenses of small business 40 30 50

76 Depreciation of buildings other than rental housing (normal tax method) 2,720 490 30

21 Bio-Diesel and small agri-biodiesel producer tax credits 2/ 30 20 20

20 Alcohol fuel credits 1/ 0 0 0

29 Credit for energy efficiency improvements to existing homes 450 0 0

66 Premiums for mortgage insurance deductible as interest 150 0 0

163 Build America Bonds 16/ 0 0 0

80 Special rules for certain film and TV production 0 100 -850

95 Opportunity Zones 3,740 2,080 -7,020

77 Accelerated depreciation of machinery and equipment (normal tax method) 22,780 6,100 -142,130

See Table 1 footnotes for specific table information
U.S. Department of the Treasury

Office of Tax Analysis

March 6, 2023

2022

Provision Present Value

of Revenue Loss

9 Expensing of exploration and development costs - oil and gas 690

10 Expensing of exploration and development costs - coal 60

33 Expensing of exploration and development costs - nonfuels 70

39 Expensing of multiperiod timber growing costs 170

44 Expensing of certain multiperiod production costs - agriculture 70

43 Expensing of certain capital outlays - agriculture 40

49 Expensing of reforestation expenditures 40

64 Accelerated depreciation on rental housing (normal tax method) -3,900

76 Depreciation of buildings other than rental (normal tax method) -150

77 Accelerated depreciation of machinery and equipment (normal tax method) -17,770

78 Expensing of certain small investments (normal tax method) 0

63 Credit for low-income housing investments 9,680

100 Qualified tuition programs (includes Education IRA) 6,960

141 Defined benefit employer plans 81,081

142 Defined contribution employer plans 184,560

143 Exclusion of IRA contributions and earnings 2,390

143 Exclusion of Roth earnings and distributions 430

143 Exclusion of non-deductible IRA earnings 420

145 Exclusion of contributions and earnings for Self-Employed plans 7,660

162 Exclusion of interest on public-purpose bonds 11,930

Exclusion of interest on non-public purpose bonds 1/ 4,710

165 Deferral of interest on U.S. savings bonds 130

1/ Includes all components, other than public purpose, listed under ‘Exclusion of interest on State and local bonds’ in the Addendum to Table 1.

Table 4. PRESENT VALUE OF SELECTED TAX EXPENDITURES

FOR ACTIVITY IN CALENDAR YEAR 2022

(in millions of dollars)