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 2018–2028 using two 

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

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

TAX EXPENDITURES IN THE INCOME TAX

Tax Expenditure Estimates

All tax expenditure estimates and descriptions presented here are based upon current tax law enacted as of July 1, 2018 and 

reflect the economic assumptions from the Mid-Session Review of the 2018 Budget. In some cases, expired or repealed provisions are listed if their revenue effects occur in fiscal year 2018 or later. 

The total revenue effects for tax expenditures for fiscal years 2018–2028 are displayed according to the Budget’s functional 

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

expenditure concept.

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

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

baseline, but not the reference tax law baseline, are indicated by the designation “normal tax method’’ in the tables. The revenue effects for these items are zero using the reference tax rules. The alternative baseline concepts are discussed in detail below.

Tables 2A and 2B report separately the respective portions of the total revenue effects that arise under the individual and 

corporate income taxes. The location of the estimates under the individual and corporate headings does not imply that these 

categories of filers benefit from the special tax provisions in proportion to the respective tax expenditure amounts shown. Rather, these breakdowns show the form of tax liability that the various provisions affect. The ultimate beneficiaries of corporate 

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

Table 3 ranks the major tax expenditures by the size of their 2019–2028 revenue effect. The first column provides the number 

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

Interpreting Tax Expenditure Estimates

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

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

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

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

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

effects are not reflected in the estimates.

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

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

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

the latter the post-1982 method.

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

be moved into higher tax brackets. Alternatively, repeal of an itemized deduction could lower the revenue cost from other deductions if taxpayers are led to claim the standard deduction instead of itemizing. Similarly, if two provisions were 

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

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

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

Table 1 should be regarded as approximations.

Present-Value Estimates

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

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

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

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

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

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

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

tables.

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

during calendar year 2018 which cause the deferrals or other long-term revenue effects. For instance, a pension contribution in 

2018 would cause a deferral of tax payments on wages in 2018 and on pension fund earnings on this contribution (e.g., interest) 

in later years. In some future year, however, the 2018 pension contribution and accrued earnings will be paid out and taxes will 

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

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

Tax Expenditure Baselines

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

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

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

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

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

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

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

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

or by a specific definition of the taxpaying unit.

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

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

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

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

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

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

•There is a separate corporate income tax. 

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

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

status.

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

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

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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 law and normal tax baselines are generally similar, areas of difference include (but are not limited to): 

Tax rates. The separate schedules applying to the various taxpaying units are included in the reference law baseline convention, the Alternative Minimum Tax is treated as part of the baseline rate structure under both the reference and normal tax 

methods. 

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

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

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

normal tax baselines.3

 

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

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

Descriptions of Income Tax Provisions

Descriptions of the individual and corporate income tax expenditures reported on in this document follow. These descriptions relate to current law as of July 1, 2018. 

National Defense

1. Exclusion of benefits and allowances to armed forces personnel.—Under the baseline tax system, all compensation, including 

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

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

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

either in cash or in kind, as well as certain amounts of pay related to combat service, are excluded from income subject to tax. 

International Affairs

2. Exclusion of income earned abroad by U.S. citizens.—Under the baseline tax system, all compensation received by U.S. citizens and residents is properly included in their taxable income. It makes no difference whether the compensation is a result of 

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

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

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

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

 

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

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

from the United States.

4. Inventory property sales source rules exception.— Under the baseline tax system, worldwide income forms the tax base of 

U.S. corporations. For foreign source income taxed by the United states, taxpayers receive a credit for foreign taxes paid which 

is limited to the pre-credit U.S. tax on the foreign source income. In contrast, the sales source rules for inventory property under 

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

earnings to foreign sources than would be the case if the allocation of earnings was based on actual economic activity. This exception was repealed for tax years beginning after December 31, 2017. Under the new provision, gains, profits, and income 

from the sale or exchange of inventory property produced partly in, and partly outside, the United States is allocated and apportioned on the basis of the location of production with respect to the property.

5. Reduced tax rate on active income of controlled foreign corporations.—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 1/1/2018), 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.

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

tax system, the United States taxes income earned by U.S. corporations from serving foreign markets (e.g; exports and royalties)

at the full U.S. rate. After the passage of TCJA, domestic corporations are allowed a deduction equal to 37.5 percent of “foreign-derived intangible income,” which is essentially income from serving foreign markets (defined on a formulaic basis). The 

deduction falls to 21.875 percent in 2026.

7. 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 income from exports to be 

taxes at the qualified dividend rate of 20 percent. 

General Science, Space, and Technology

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

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

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

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

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

system would allow expensing of R&E expenditures. In contrast, under the normal tax method, the expensing of R&E expenditures is viewed as a tax expenditure. The baseline assumed for the normal tax method is that all R&E expenditures are successful and have an expected life of five years. 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.

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

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

percent of qualified research expenditures in excess of a base amount. The base amount of the credit is generally determined by 

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

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

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

Energy

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

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priately each year. In contrast to this treatment, current law allows immediate deduction, i.e. expensing, of intangible drilling 

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

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

of costs sooner, it is more generous for the taxpayer than amortization. Expensing provisions for exploration expenditures apply only to properties for which a deduction for percentage depletion is allowable. For oil and gas wells, integrated oil companies may deduct only 70 percent of intangible drilling costs and must amortize the remaining 30 percent over five years. Nonintegrated oil companies may expense all such costs.

11. Excess of percentage over cost depletion, fuels.—The baseline tax system would allow recovery of the costs of developing 

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

costs of developing or acquiring the asset are capitalized and then gradually reduced over an estimate of the asset’s economic 

life, as is appropriate for measuring net income. In contrast, the Tax Code generally allows independent fuel producers and royalty owners to take percentage depletion deductions rather than cost depletion on limited quantities of output. Under percentage depletion, taxpayers deduct a percentage of gross income from fossil fuel production. In certain cases the deduction is limited to a fraction of the asset’s net income. Over the life of an investment, percentage depletion deductions can exceed the cost 

of the investment. Consequently, percentage depletion offers more generous tax treatment than would cost depletion, which 

would limit deductions to an investment’s cost.

12. Exception from passive loss limitation for working interests in oil and gas properties.—The baseline tax system accepts current law’s general rule limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., wages, 

interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate, 

and there are numerous additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. Losses are limited in an attempt to limit tax sheltering activities. Passive losses that are unused may be carried forward and applied against future passive income. An exception from the passive loss limitation is provided for a working interest 

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

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

to whether they materially participate in the activity

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

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

tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8 percent surtax on high income taxpayers), depending on the taxpayer’s income. In contrast, current law allows capital gains realized by individuals to be taxed at a preferentially 

low rate that is no higher than 20 percent (plus the 3.8 percent surtax). Certain sales of coal under royalty contracts qualify for 

taxation as capital gains rather than ordinary income, and so benefit from the preferentially low 20 percent maximum tax rate

on capital gains. 

14. 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.

15. 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. 

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

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

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

power, municipal solid waste, or qualified hydropower and sold to an unrelated party. Wind facilities must have begun construction before January 1, 2020. Facilities that begin construction in 2017 receive 80 percent of the credit, facilities that begin 

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

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

placed in service before January 1, 2012. The Tax Code also provided an income tax credit for Indian coal facilities. The Indian coal facilities credit expired on December 31, 2017. 

17. 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 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. 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 per barrel and is zero for a reference price 

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that exceeds $18. All dollar amounts are adjusted for inflation from 2004.

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

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

provides credits for investments in solar and geothermal energy property, qualified fuel cell power plants, stationary microturbine power plants, geothermal heat pumps, small wind property and combined heat and power property. . The credit is 30 

percent for property that begins construction before 2020, 26 percent for property that begins construction in 2020, and 22 percent for property that begins construction in 2021 and in all cases that is placed in service before January 1, 2024. A 10 percent 

credit is available for geothermal or qualified solar property placed in service after December 31, 2023. Owners of renewable 

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

19. Alcohol fuel credits.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provided an income tax credit for qualified cellulosic biofuel production which was renamed the Second generation biofuel producer credit. This provision expired on December 31, 2017. 

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

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

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

Bio-diesel credit, the taxpayer could claim a refundable excise tax credit. In addition, small agri-biodiesel producers were eligible for a separate income tax credit for biodiesel production and a separate credit was available for qualified renewable diesel 

fuel mixtures. This provision expired on December 31, 2017. 

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

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

activities. In contrast, the Tax Code allows credits for plug-in electric-drive motor vehicles, alternative fuel vehicle refueling 

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

22. 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. 

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

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

fully taxable.

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

individuals. However, the Tax Code allowed electric utilities to defer gains from the sale of their transmission assets to a FERCapproved independent transmission company. The sale of property must have been made prior to January 1, 2018. 

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. Temporary 50 percent expensing for equipment used in the refining of liquid fuels.—The baseline tax system allows the 

taxpayer to deduct the decline in the economic value of an investment over its economic life. However, the Tax Code provided 

for an accelerated recovery of the cost of certain investments in refineries by allowing partial expensing of the cost, thereby giving such investments a tax advantage. Qualified refinery property must have been placed in service before January 1, 2014.

27. Natural gas distribution pipelines treated as 15-year property.—The baseline tax system allows taxpayers to deduct the 

decline in the economic value of an investment over its economic life. However, the Tax Code allows depreciation of natural 

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

relative to deductions based on economic depreciation.

28. 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.

29. 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 

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energy efficient commercial building property. The basis of such property is reduced by the amount of the deduction. This 

provision expired on December 31, 2017. 

30. Credit for construction of new energy efficient homes.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. 

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

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

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

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

31. 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. 

32. 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, and 22 percent for property placed in service in 2021. 

33. 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.

34. 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. 

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

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

activities. In contrast, the Tax Code allows a tax credit equal to 1.8 cents times the number of kilowatt hours of electricity produced at a qualifying advanced nuclear power facility. A taxpayer may claim no more than $125 million per 1,000 megawatts of 

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

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

36. 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

37. 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.

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

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

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

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

depletion deductions can exceed the cost of the investment. Consequently, percentage depletion offers more generous tax 

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

39. 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.

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

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

current law certain timber sales can be treated as a capital gain rather than ordinary income and therefore subject to the lower 

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

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

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

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

42. 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.

43. 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. 

44. 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

45. 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.

46. 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.

47. 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.

48. Capital gains treatment of certain agriculture income.—For individuals, tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8 percent surtax on high income taxpayers), depending on the taxpayer’s income. The baseline tax 

system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to 

apply to certain types or sources of income. In contrast, current law allows capital gains to be taxed at a preferentially low rate 

that is no higher than 20 percent (plus the 3.8 percent surtax). Certain agricultural income, such as unharvested crops, qualify 

for taxation as capital gains rather than ordinary income, and so benefit from the preferentially low 20 percent maximum tax 

rate on capital gains. 

49. 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.

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

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

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

51. 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.

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

52. 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.

53. 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. 

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

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

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

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

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

receipts do not exceed $150,000 and more than 35 percent of gross receipts consist of premiums. Also, non-life insurance companies with no more than $2.25 million of annual net written premiums generally may elect to pay tax only on their taxable 

investment income provided certain diversification requirements are met. Their underwriting income (premiums, less insurance 

losses and expenses) is excluded from tax. The $2.25 million premium limit is indexed for inflation. 

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

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

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

insurance companies is subject to tax, albeit under special rules. However, income from insurance operations conducted by 

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

56. Small life insurance company deduction.— The baseline tax system would require corporations to pay taxes on their 

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

sources of income. Under pre-2018 law, small life insurance companies (with gross assets of less than $500 million) could deduct 60 percent of the first $3 million of otherwise taxable income. The deduction phased out for otherwise taxable income between $3 million and $15 million. This provision was repealed by P.L. 115-97, effective for taxable years beginning after December 31, 2017. 

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

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

Consumers pay for some deposit-linked services, such as check cashing, by accepting a below-market interest rate on their demand deposits. If they received a market rate of interest on those deposits and paid explicit fees for the associated services, they

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

the difference between the risk-free market interest rate and below-market interest rates on demand deposits, which under competitive conditions should equal the value added of deposit services.

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

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

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

59. 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.

60. 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.

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61. Deduction for property taxes on real property.—Under the baseline tax system, expenses incurred in earning income 

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

taxed. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for the value of owner-occupied housing 

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

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

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

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

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

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

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

is, therefore, a tax expenditure.

63. 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.

64. 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.

65. 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. 

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

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

certain low-income housing are eligible for a tax credit. The credit rate is set so that the present value of the credit is equal to 70 

percent for new construction and 30 percent for (1) housing receiving other Federal benefits (such as tax-exempt bond financing), or (2) substantially rehabilitated existing housing. The credit can exceed these levels in certain statutorily defined and State 

designated areas where project development costs are higher. The credit is allowed in equal amounts over 10 years and is generally subject to a volume cap. 

67. Accelerated depreciation on rental housing.—Under an economic income tax, the costs of acquiring a building are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and tear or obsolescence. This insures that the net income from the rental property is measured appropriately each year. Current law allows depreciation that is accelerated relative to economic depreciation. However, the depreciation provisions of the Tax Code are part 

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

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

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

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

indebtedness of up to $2 million ($1 million in the case of a married individual filing a separate return) from a qualified principal residence. The provision applied to debt discharged after January 1, 2007, and before January 1, 2018. 

69. 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.

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70. Exceptions from imputed interest rules.—Under the baseline tax system, holders (issuers) of debt instruments are generally required to report interest earned (paid) in the period it accrues, not when received. In addition, the amount of interest accrued is determined by the actual price paid, not by the stated principal and interest stipulated in the instrument. But under current law, any debt associated with the sale of property worth less than $250,000 is exempted from the general interest accounting rules. This general $250,000 exception is not a tax expenditure under reference law but is under normal law. Current law 

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

normal law. These exceptions include, sales of personal residences worth more than $250,000, and sales of farms and small 

businesses worth between $250,000 and $1 million.

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

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

on regular income vary from 10 percent to 39.6 percent (plus a 3.8 percent surtax on high income taxpayers), depending on the 

taxpayer’s income. In contrast, under current law, qualified dividends are taxed at a preferentially low rate that is no higher 

than 20 percent (plus the 3.8 percent surtax). 

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

under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. For individuals, tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8 percent surtax on high income taxpayers), depending on the taxpayer’s income. In contrast, under current law, capital gains on assets held for more than 

one year are taxed at a preferentially low rate that is no higher than 20 percent (plus the 3.8 percent surtax). 

73. 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. 

74. 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.

75. 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.

76. 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.

77. 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.

78. Depreciation of buildings other than rental housing.—Under an economic income tax, the costs of acquiring a building 

are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and tear 

or obsolescence. This insures that the net income from the property is measured appropriately each year. Current law allows 

depreciation deductions that differ from those under economic depreciation. However, the depreciation provisions of the Tax 

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

in contrast, depreciation allowances reflect estimates of economic depreciation.

79. Accelerated depreciation of machinery and equipment.—Under an economic income tax, the costs of acquiring machinery and equipment are capitalized and depreciated over time in accordance with the decline in the property’s economic value 

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

Current law allows depreciation deductions that are accelerated relative to economic depreciation. 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 law rules, and thus do not give rise to tax 

expenditures under reference law. Under normal law, in contrast depreciation allowances reflect estimates of economic depreciation.

80. Expensing of certain small investments.—Under the reference law baseline, the costs of acquiring tangible property and 

computer software would be depreciated using the Tax Code’s depreciation provisions. Under the normal tax baseline, depreciation allowances are estimates of economic depreciation. However, subject to investment limitations, the Tax Code allows up 

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to $1 million (indexed for inflation) in qualifying investments in tangible property and certain computer software to be expensed 

rather than depreciated over time.

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

normal tax method; therefore the lower rate in effect in 2017 is considered a tax expenditure under this concept.

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

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

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

cap discussed in the mortgage housing bond section above.

83. Deduction for U.S. production activities.—The baseline tax system generally would tax all income under the regular tax 

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

through tax year 2017, the Tax Code allowed for a deduction equal to a portion of taxable income attributable to domestic production. This deduction was repealed by P.L. 115-97. 

84. 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 expired at the end of 

2016.

85. 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 

twenty percent of income attributable to domestic pass-through businesses, subject to certain limitations. In contrast, for tax 

years 2018 to 2025, the Tax Code allows for a deduction equal to up to twenty percent of income attributable to domestic passthrough businesses, subject to certain limitations.

Transportation

86. 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.

87. 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). 

88. 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 2018, the maximum amount of the parking exclusion is $260 per month. The tax expenditure estimate does not include any 

subsidy provided through employer-owned parking facilities. However, beginning in 2018, parking expenses are no longer deductible to employers (except government). 

89. 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 $260 per month in 2018. However, beginning in 2018, transit expenses are no longer deductible to employers (except government).

90. 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.

91. 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 

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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

92. Investment credit for rehabilitation of structures.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. Under prior law, the Tax Code allowed a 10

percent investment tax credit for the rehabilitation of buildings that are used for business or productive activities and that were 

erected before 1936 for other than residential purposes. The taxpayer’s recoverable basis must be reduced by the amount of the 

credit. The credit is repealed for for rehabilitation expenditures incurred after December 31, 2017. 

93. 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.

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

profits under the regular tax rate schedule. In contrast, the Tax Code provides for the incomes of mutual and cooperative telephone and electric companies to be exempt from tax if at least 85 percent of their revenues are derived from patron service 

charges.

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

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

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

receive tax benefits such as an employment credit, increased expensing of investment in equipment, special tax-exempt financing, and certain capital gains incentives. A taxpayer’s ability to accrue new tax benefits for empowerment zones expired on December 31, 2017. 

96. 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 $3.5 billion for each calendar year 2000 

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

97. 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.

98. 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.

99. 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.

100. 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. Opportunity zone designations expire on December 

31, 2028.

101. 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 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 before January 1, 2018 are eligible for the credit. Employers must reduce their 

deduction for wages paid by the amount of the credit claimed.

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Education, Training, Employment, and Social Services

102. Exclusion of scholarship and fellowship income.—Scholarships and fellowships are excluded from taxable income to the 

extent they pay for tuition and course-related expenses of the grantee. Similarly, tuition reductions for employees of educational 

institutions and their families are not included in taxable income. From an economic point of view, scholarships and fellowships are either gifts not conditioned on the performance of services, or they are rebates of educational costs. Thus, under the 

baseline tax system of the reference law method, this exclusion is not a tax expenditure because this method does not include 

either gifts or price reductions in a taxpayer’s gross income. The exclusion, however, is considered a tax expenditure under the 

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

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

particular activities, investments, or industries. Under current law in 2018, however, there were two credits for certain postsecondary education expenses. A deduction for post-secondary expenses expired at the end of 2017. The American Opportunity 

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

during each of the first four years of the student’s post-secondary education. The credit is phased out for taxpayers with modified adjusted gross income between $160,000 and $180,000 if married filing jointly ($80,000 and $90,000 for other taxpayers), 

not indexed. The Lifetime Learning Credit allows a non-refundable credit for 20 percent of an eligible student’s qualified tuition and fees, up to a maximum credit per return of $2,000. In 2017, the credit is phased out ratably for taxpayers with modified 

AGI between $114,000 and $134,000 if married filing jointly ($57,000 and $67,000 for other taxpayers), indexed. The Lifetime 

Learning credit can be claimed in any year in which post-secondary education expenses are incurred. Only one credit can be 

claimed per qualifying student. The deduction for post-secondary education expenses provided a maximum deduction of $4,000 

for qualified post-secondary education expenses for taxpayers with modified adjusted gross income up to $130,000 if married 

filing jointly ($65,000 for other taxpayers). Taxpayers with modified adjusted gross income up to $160,000 if married filing 

jointly ($80,000 for other taxpayers) could deduct up to $2,000 of qualified post-secondary education expenses. This provision 

expired on December 31, 2017. 

104. Education Individual Retirement Accounts (IRA).—The baseline tax system generally would tax all income under the 

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

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

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

student’s education expenses. The maximum contribution to an education IRA is $2,000 per beneficiary. In 2018, the maximum contribution is phased down ratably for taxpayers with modified AGI between $190,000 and $220,000 if married filing 

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

105. 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 2018, the maximum deduction is phased down ratably for taxpayers with modified 

AGI between $135,000 and $165,000 if married filing jointly ($65,000 and $80,000 for other taxpayers).

106. Qualified tuition programs.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Some States have 

adopted prepaid tuition plans, prepaid room and board plans, and college savings plans, which allow persons to pay in advance 

or save for college expenses for designated beneficiaries. Under current law, investment income, or the return on prepayments, 

is not taxed when earned, and is tax-exempt when withdrawn to pay for qualified expenses. 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.

107. 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.

108. 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.

109. Credit for holders of zone academy bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. Under current law, however, financial institutions that own zone academy bonds receive a nonrefundable tax credit rather than interest. The credit is included in gross income. Proceeds from zone academy bonds may only 

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

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

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

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

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

31, 1989 is tax-exempt if the bonds are transferred to an educational institution to pay for educational expenses. The tax exemption is phased out for taxpayers with AGI between $117,250 and $147,250 if married filing jointly ($78,150 and $93,150 for other taxpayers) in 2018. 

111. 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). In absence of 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. 

112. Charitable contributions to educational institutions.—The baseline tax system would not allow a deduction for personal 

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

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

the asset’s current value without being taxed on any appreciation in value. An individual’s total charitable contribution generally may not exceed 50 percent (60 percent for tax years 2018 and 2025) of adjusted gross income; a corporation’s total charitable 

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

113. Exclusion of employer-provided educational assistance.—Under the baseline tax system, all compensation, including 

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

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

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

maximum exclusion is $5,250 per taxpayer.

114. 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).

115. 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.

116. 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.

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

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

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

on or before December 31, 2019 and who are certified as members of various targeted groups. The amount of the credit that can 

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

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

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

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

119. 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 

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

120. 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.

121. 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. 

122. Exclusion of employee meals and lodging.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. 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 50 percent of the expenses of employerprovided meals. Employer-provided lodging is fully deductible by the employer, in general.

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

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

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

dependents are eligible for the credit. The credit is equal to 35 percent of qualified expenditures for taxpayers with incomes of 

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

$15,000.

124. 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. 

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

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

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

total charitable contribution generally may not exceed 50 percent of adjusted gross income; a corporation’s total charitable contributions generally may not exceed 10 percent of pre-tax income.

126. 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.

127. 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.

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

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

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

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

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

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

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

by the amount of the credit claimed. The credit does not apply to taxable years beginning after December 31, 2017. 

129. Credit for employer differential wage payments.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides employers with a 20 percent tax credit for eligible differential wages paid to employees who are members of the uniformed services while on active duty for more than 30 days. The 

amount of eligible differential wage payments made to a qualified employee in a taxable year is capped at $20,000. Employers 

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

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Health

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

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

current law, employer-paid health insurance premiums and other medical expenses (including long-term care) are not included 

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

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

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

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

income from self-employment.

132. 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 2018, $3,350 for taxpayers with individual coverage and $6,750 for taxpayers 

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

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

contrast, under current law personal expenditures for medical care (including the costs of prescription drugs) exceeding 7.5 percent of the taxpayer’s adjusted gross income are deductible. For tax years beginning after 2012, only medical expenditures exceeding 10 percent of the taxpayer’s adjusted gross income are deductible. However, for the years 2013, 2014, 2015 and 2016, if 

either the taxpayer or the taxpayer’s spouse turns 65 before the end of the taxable year, the threshold remains at 7.5 percent of 

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

134. 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.

135. 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. 

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

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

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

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

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

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

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

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

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

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

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

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ments, or industries. In contrast, under current law drug firms can claim a tax credit of 50 percent of the costs for clinical testing 

required by the Food and Drug Administration for drugs that treat rare physical conditions or rare diseases. This rate is modified to 25 percent by TCJA for expenditures incurred or paid in tax years beginning after December 31, 2017. 

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

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

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

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

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

surplus. The deduction is limited to the insurer’s taxable income determined without the special deduction.

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

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

of 72.5 percent for the purchase of health insurance coverage by individuals eligible for Trade Adjustment Assistance and certain Pension Benefit Guarantee Corporation pension recipients. This provision will expire on December 31, 2019.

141. Distributions from retirement plans for premiums for health and long-term care insurance.—Under the baseline tax system, 

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

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

care premiums of public safety officers.

Income Security

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

Under current law, however, taxpayers with children under age 17 can qualify for a $2,000 per child partially refundable child 

credit. Up to $1,400 per child of unclaimed credit due to insufficient tax liability may be refundable – taxpayers may claim a 

refund for 15 percent of earnings in excess of a $2,500 floor, up to the lesser of the amount of unused credit or $1,400 per child. 

To be eligible for the child credit, the child must have an SSN. A taxpayer may also claim a nonrefundable credit of $500 for 

each qualifying child not eligible for the $2,000 credit (those over sixteen and those without SSNs) and for each dependent relative. The total combined child and other dependent credit is phased out for taxpayers at the rate of $50 per $1,000 of modified 

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

tax years beginning after December 31, 2025, the credit returns to its pre-TCJA value of $1,000. At that time, up to the full value of the credit (subject to a phase-in of 15 percent of earnings in excess of $3,000) will be refundable and the $500 other dependent credit will expire. The credit will once again phase out at the rate of $50 per $1,000 of modified AGI above $110,000 

($75,000 for single or head of household filers and $55,000 for married taxpayers filing separately). The social security requirement will remain in place

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

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

to railroad retirees is not generally subject to the income tax unless the recipient’s gross income reaches a certain threshold under current law. See provision number 158, Social Security benefits for retired workers, for discussion of the threshold.

144. 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.

145. Exclusion of public assistance benefits.—Under the reference law baseline tax system, gifts and transfers are not treated 

as income to the recipients. In contrast, the normal tax method considers cash transfers from the Government as part of the recipients’ income, and thus, treats the exclusion for public assistance benefits under current law as a tax expenditure. 

146. 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.

147. 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.

148. 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 

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plans is deferred until the money is withdrawn.

149. 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 2018, an employee could exclude up to 

$18,500 of wages from AGI under a qualified arrangement with an employer’s 401(k) plan. Employees age 50 or over could 

exclude up to $24,500 in contributions. The defined contribution plan limit, including both employee and employer contributions, is $55,000 in 2018. The tax on contributions made by both employees and employers and the investment income earned 

by these plans is deferred until withdrawn.

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

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

the return to their retirement savings. The IRA contribution limit is $5,500 in 2018; taxpayers age 50 or over are allowed to 

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

151. 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 $63,000 for joint filers, $47,500 for head of 

household filers, and $31,500 for other filers in 2018. 

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

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

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

up to a maximum of $55,000 in 2018. 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.

153. 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. 

154. 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.

155. 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.

156. 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.

157. Special Employee Stock Ownership Plan (ESOP) rules.—ESOPs are a special type of tax-exempt employee benefit plan. 

Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, employer-paid contributions (the value of 

stock issued to the ESOP) are deductible by the employer as part of employee compensation costs. They are not included in the 

employees’ gross income for tax purposes, however, until they are paid out as benefits. In addition, the following special income tax provisions for ESOPs are intended to increase ownership of corporations by their employees: (1) annual employer 

contributions are subject to less restrictive limitations than other qualified retirement plans; (2) ESOPs may borrow to purchase 

employer stock, guaranteed by their agreement with the employer that the debt will be serviced by his payment (deductible by 

him) of a portion of wages (excludable by the employees) to service the loan; (3) employees who sell appreciated company stock 

to the ESOP may defer any taxes due until they withdraw benefits; (4) dividends paid to ESOP-held stock are deductible by the 

employer; and (5) earnings are not taxed as they accrue.

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

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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 $1,600 standard deduction if single, or $1,300 if married in 2018. 

159. 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 $1,600 standard deduction if single, or $1,300 if married in 2018. 

160. Tax credit for the elderly and disabled.—Under the baseline tax system, a credit targeted at a specific group within a 

given filing status or for particular activities would not be allowed. In contrast, the Tax Code allows taxpayers who are 65 years 

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

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

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

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

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

161. 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.

162. 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 2018, for a family with one qualifying child, the credit is 34 percent of the first $10,180 of earned income. The credit is 

40 percent of the first $14,290 of income for a family with two qualifying children, and it is 45 percent of the first $14,14290 of 

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

7.65 percent credit on the first $6,780 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 2018, 

the phase-down for married filers begins at incomes $5,690 ($5,680 for filers without children) greater than for otherwise similar 

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

smaller inflation adjustment. This change is permanent. 

Social Security

163. Social Security benefits for retired and disabled workers and spouses, dependents, and survivors.—The baseline tax system 

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

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

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

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

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

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

treated in a similar manner. Railroad Social Security Equivalent benefits are treated like Social Security benefits. See also provision number 138, Exclusion of railroad Social Security equivalent benefits.

164. Credit for certain employer social security contributions.—Under the baseline tax system, employer contributions to Social Security represent labor cost and are deductible expenses. Under current law, however, certain employers are allowed a tax 

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

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

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

only with respect to FICA taxes paid on tips.

Veterans Benefits and Services

165. Exclusion of veterans death benefits and disability compensation.—Under the baseline tax system, all compensation, inU.S. Department of the Treasury 

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cluding 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.

166. 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.

167. 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.

168. 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

169. 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.

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

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

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

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

171. 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 61.) 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

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

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

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

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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

National Defense

1 12,030 12,450 11,220 11,240 11,590 12,050 12,550 13,090 13,660 14,270 14,920 127,040

International affairs: 

2 6,930 7,280 7,640 8,020 8,420 8,840 9,290 9,750 10,240 10,750 11,290 91,520

3 240 250 260 280 290 300 320 330 350 370 390 3,140

4 1,250 0 0 0 0 0 0 0 0 0 0 0

5 63,400 34,490 38,950 41,870 43,500 34,020 20,510 9,410 45,150 73,890 77,270 419,060

6 4,290 7,420 7,970 9,730 10,990 11,440 11,950 12,490 9,090 6,880 7,220 95,180

7 1,220 1,280 1,340 1,410 1,480 1,560 1,630 1,720 1,800 1,890 1,990 16,100

General science, space, and technology: 

8 8,510 6,750 7,430 8,420 -26,470 -46,290 -33,850 -20,540 -6,300 0 0 -110,850

9 Credit for increasing research activities 13,310 14,480 15,870 17,310 18,710 20,080 21,480 22,930 24,390 25,890 27,420 208,560

Energy: 

10 970 850 820 750 710 710 710 740 1,010 1,230 1,270 8,800

11 350 290 410 530 590 620 660 700 810 890 920 6,420

12 10 0 0 0 10 10 10 10 10 10 10 70

13 Capital gains treatment of royalties on coal 160 140 130 130 140 140 150 150 170 190 200 1,540

14 Exclusion of interest on energy facility bonds 10 10 10 10 10 10 10 10 10 20 20 120

15 Enhanced oil recovery credit 390 520 570 620 660 750 810 850 850 840 810 7,280

16 Energy production credit 1/ 3,150 3,240 3,320 3,510 3,680 3,760 3,710 3,570 3,110 2,720 2,360 32,980

17 Marginal wells credit 0 0 70 70 90 140 190 230 270 300 330 1,690

18 Energy investment credit 1/ 3,180 4,300 5,100 5,250 4,650 3,620 2,460 1,700 1,230 1,030 970 30,310

19 Alcohol fuel credits 2/ 10 0 0 0 0 0 0 0 0 0 0 0

20 20 0 0 0 0 0 0 0 0 0 0 0

21 740 640 450 360 360 350 310 240 200 170 160 3,240

22 Exclusion of utility conservation subsidies 430 450 470 490 510 540 570 590 620 650 680 5,570

23 70 70 70 70 70 70 70 70 70 70 70 700

24 -80 -120 -100 -80 -60 -40 -10 0 0 0 0 -410

25 Credit for investment in clean coal facilities 90 60 30 70 160 430 520 350 210 110 30 1,970

26 -820 -460 -370 -280 -190 -90 -20 0 0 0 0 -1,410

27 100 70 70 50 30 -10 -50 -80 -120 -140 -140 -320

28 230 180 180 190 210 220 230 250 290 320 340 2,410

29 40 10 0 0 0 0 0 0 0 0 0 10

30 120 50 10 0 0 0 0 0 0 0 0 60

31 260 0 0 0 0 0 0 0 0 0 0 0

32 1,900 1,530 1,180 770 190 30 0 0 0 0 0 3,700

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

34 Advanced Energy Property Credit 0 10 10 10 20 20 20 20 20 20 20 170

35 Advanced nuclear power production credit 0 80 200 300 340 340 340 140 0 0 0 1,740

36 90 100 100 110 110 120 120 130 130 140 150 1,210

Natural resources and environment: 

37 50 20 30 30 50 60 50 30 40 40 50 400

Credit for residential energy efficient property 

Reduced tax rate for nuclear 

decommissioning funds

Expensing of exploration and development 

costs, nonfuel minerals 

Tax credits for clean-fuel burning vehicles 

and refueling property

Credit for holding clean renewable energy 

bonds 4/

Deferral of gain from dispositions of 

transmission property to implement FERC 

restructuring policy

Temporary 50% expensing for equipment 

used in the refining of liquid fuels

Natural gas distribution pipelines treated as 

15-year property

Amortize all geological and geophysical 

expenditures over 2 years

Allowance of deduction for certain energy 

efficient commercial building property

Credit for construction of new energy efficient 

homes

Credit for energy efficiency improvements to 

existing homes

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations and individuals

Exclusion of benefits and allowances to 

armed forces personnel 

Exclusion of income earned abroad by U.S. 

citizens 

Exclusion of certain allowances for Federal 

employees abroad

Inventory property sales source rules 

exception

Reduced tax rate on active income of 

controlled foreign corporations (normal tax 

method)

Deduction for foreign-derived intangible 

income dervied from trade or business within 

the U.S.

Interest Charge Domestic International Sales 

Corporations (IC-DISCs) 

Expensing of research and experimentation 

expenditures (normal tax method) 

Expensing of exploration and development 

costs, fuels 

Excess of percentage over cost depletion, 

fuels 

Exception from passive loss limitation for 

working interests in oil and gas properties 

Bio-Diesel and small agri-biodiesel producer 

tax credits 3/

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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations and individuals

38 330 250 250 250 250 260 270 280 310 330 330 2,780

39 320 340 350 370 410 440 460 470 500 530 540 4,410

40 160 140 130 130 140 140 150 150 170 190 200 1,540

41 220 200 210 220 230 250 250 270 290 320 340 2,580

42 290 140 240 350 470 520 530 550 560 570 590 4,520

43 Carbon oxide sequestration credit 200 110 70 120 190 260 350 440 540 630 720 3,430

44 30 30 30 30 30 30 40 40 40 60 60 390

Agriculture: 

45 Expensing of certain capital outlays 160 150 160 170 180 190 190 200 250 280 290 2,060

46 260 250 270 280 290 310 320 340 420 460 480 3,420

47 30 30 30 30 40 40 40 40 70 70 70 460

48 1,590 1,380 1,330 1,340 1,370 1,410 1,470 1,540 1,720 1,900 1,990 15,450

49 Income averaging for farmers 100 110 110 120 120 130 130 140 230 230 230 1,550

50 Deferral of gain on sale of farm refiners 15 15 15 15 15 15 20 20 20 20 20 175

51 Expensing of reforestation expenditures 50 50 60 70 70 80 80 80 90 100 100 780

Commerce and housing: 

Financial institutions and insurance: 

52 Exemption of credit union income 2,380 1,861 2,010 2,097 2,214 2,340 2,411 2,511 2,692 2,865 3,016 24,017

53 Exclusion of life insurance death benefits 13,510 14,350 15,550 16,600 17,520 18,460 19,390 20,340 21,690 23,480 24,630 192,010

54 30 40 40 40 40 50 50 50 60 60 60 490

55 480 320 330 340 350 360 370 380 400 410 420 3,680

56 Small life insurance company deduction 10 0 0 0 0 0 0 0 0 0 0 0

57 3,900 2,250 1,170 1,210 1,240 1,280 1,310 1,350 1,420 1,480 1,530 14,240

Housing: 

58 890 920 960 1,020 1,110 1,200 1,260 1,300 1,380 1,440 1,490 12,080

59 910 960 990 1,060 1,160 1,250 1,310 1,340 1,430 1,490 1,550 12,540

60 37,160 26,850 29,820 33,090 36,340 39,480 42,480 45,170 93,380 121,910 129,090 597,610

61 15,360 6,250 6,650 7,100 7,520 7,930 8,300 8,630 42,220 61,210 65,030 220,840

62 Deferral of income from installment sales 1,700 1,720 1,750 1,790 1,840 1,910 2,000 2,090 2,190 2,290 2,400 19,980

63 Capital gains exclusion on home sales 43,760 44,380 46,600 49,000 51,470 54,020 56,690 59,430 67,070 72,600 76,070 577,330

64 Exclusion of net imputed rental income 116,590 121,070 125,610 129,970 134,030 138,090 142,130 146,710 188,840 199,400 210,190 1,536,040

65 5,720 6,030 6,390 6,750 7,090 7,400 7,720 8,380 9,330 9,690 10,060 78,840

66 9,140 9,040 9,070 9,230 9,410 9,620 9,870 10,130 10,430 10,740 10,960 98,500

67 2,460 2,810 3,410 4,130 4,890 5,600 6,260 6,920 8,500 9,690 10,500 62,710

68 Discharge of mortgage indebtedness 210 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

69 Discharge of business indebtedness -50 10 50 50 40 30 20 20 40 50 50 360

70 Exceptions from imputed interest rules 50 60 60 70 70 70 70 70 90 90 90 740

71 Treatment of qualified dividends 29,690 28,730 29,820 31,190 32,860 34,850 37,130 39,690 45,080 50,720 54,050 384,120

72 118,630 102,910 99,210 99,890 101,950 105,290 109,710 114,910 128,090 141,870 148,780 1,152,610

73 1,010 1,240 1,410 1,530 1,640 1,750 1,850 1,930 2,000 2,080 2,160 17,590

74 Step-up basis of capital gains at death 46,730 49,920 51,840 53,630 56,160 58,980 62,450 66,040 69,900 74,220 79,050 622,190

75 Carryover basis of capital gains on gifts 3,330 3,040 3,030 2,930 2,830 2,740 2,710 2,720 2,950 3,180 3,220 29,350

76 70 70 70 70 70 70 80 80 80 80 90 760

77 Deferral of gains from like-kind exchanges 6,800 2,850 2,980 3,140 3,290 3,460 3,630 3,810 4,000 4,190 4,400 35,750

78 -8,130 -7,600 -8,110 -8,630 -9,170 -9,710 -10,320 -10,780 -11,940 -12,800 -13,460 -102,520

79 67,820 68,750 65,410 63,890 63,550 43,830 21,700 4,830 -10,750 -25,410 -10,380 285,420

80 1,430 1,660 2,290 2,690 3,000 4,540 6,350 7,870 10,280 12,270 11,930 62,880

Deductibility of State and local property tax on 

owner-occupied homes 6/

Exception from passive loss rules for $25,000 

of rental loss 

Accelerated depreciation on rental housing 

(normal tax method) 

Capital gains (except agriculture, timber, iron 

ore, and coal)

Capital gains exclusion of small corporation 

stock

Ordinary income treatment of loss from small 

business corporation stock sale 

Depreciation of buildings other than rental 

housing (normal tax method) 

Accelerated depreciation of machinery and 

equipment (normal tax method) 

Expensing of certain small investments 

(normal tax method) 

Expensing of certain multiperiod production 

costs 

Treatment of loans forgiven for solvent 

farmers

Capital gains treatment of certain agriculture 

income 

Exemption or special alternative tax for small 

property and casualty insurance companies 

Tax exemption of insurance income earned 

by tax-exempt organizations

Exclusion of interest spread of financial 

institutions

Exclusion of interest on owner-occupied 

mortgage subsidy bonds 

Exclusion of interest on rental housing bonds

Deductibility of mortgage interest on owneroccupied homes 

Excess of percentage over cost depletion, 

nonfuel minerals 

Exclusion of interest on bonds for water, 

sewage, and hazardous waste facilities

Capital gains treatment of certain timber 

income 

Expensing of multiperiod timber growing 

costs 

Tax incentives for preservation of historic 

structures 

Deduction for endangered species recovery 

expenditures

Credit for low-income housing investments

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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations and individuals

81 380 0 0 0 0 0 0 0 0 0 0 0

82 Exclusion of interest on small issue bonds 120 120 120 130 140 150 160 170 180 190 200 1,560

83 Deduction for US production activities 3,610 0 0 0 0 0 0 0 0 0 0 0

84 1,330 -250 -240 -200 -190 -200 -150 -60 -20 -10 -10 -1,330

85 34,065 53,273 57,429 61,260 64,855 68,493 72,260 76,707 25,831 0 0 480,108

Transportation: 

86 Tonnage tax 80 90 90 90 100 100 110 110 120 130 130 1,070

87 Deferral of tax on shipping companies 12 12 12 12 12 12 12 12 12 12 12 120

88 2,120 2,201 2,271 2,343 2,449 2,495 2,555 2,639 2,717 2,793 2,874 25,337

89 340 363 383 407 435 453 475 505 532 562 592 4,707

90 130 40 40 20 20 10 10 10 0 0 0 150

91 190 170 170 160 160 140 140 130 130 120 110 1,430

Community and regional development: 

92 10 10 0 0 0 0 0 0 0 0 0 10

93 560 570 610 640 700 760 790 820 870 910 930 7,600

94 110 90 90 100 100 100 100 110 110 110 110 1,020

95 110 50 40 10 10 10 10 10 0 0 0 140

96 1,410 1,320 1,280 1,210 1,090 880 570 290 80 -120 -250 6,350

97 170 170 170 160 170 170 160 160 150 150 130 1,590

98 90 90 90 90 90 100 90 90 80 70 70 860

99 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 10 100

100 Opportunity Zones 460 1,980 2,510 1,850 1,730 1,340 1,390 1,320 -4,040 -5,930 490 2,640

101 Employee retention credit 460 200 60 40 40 30 30 30 20 20 10 480

Education, training, employment, and social services: 

Education: 

102 3,070 2,840 2,960 3,100 3,250 3,400 3,550 3,720 4,110 4,730 4,920 36,580

103 17,450 16,300 16,360 16,490 16,550 16,590 16,550 16,440 16,490 17,220 17,280 166,270

104 Education Individual Retirement Accounts 30 40 40 40 40 40 40 30 30 30 30 360

105 Deductibility of student-loan interest 2,300 1,980 2,030 2,060 2,090 2,110 2,150 2,190 2,280 2,700 2,730 22,320

106 Qualified tuition programs 2,090 2,200 2,420 2,650 2,920 3,240 3,630 4,110 5,050 6,050 7,170 39,440

107 Exclusion of interest on student-loan bonds 240 250 260 280 300 330 340 350 380 390 410 3,290

108 1,830 1,900 1,990 2,110 2,310 2,500 2,620 2,690 2,860 3,000 3,080 25,060

109 180 170 150 130 110 90 80 60 50 50 40 930

110 30 30 30 40 40 40 40 40 50 50 50 410

111 2,860 0 0 0 0 0 0 0 5,820 8,790 8,940 23,550

112 5,400 4,140 4,450 4,790 5,100 5,410 5,720 6,020 7,160 9,200 9,620 61,610

113 880 890 940 990 1,040 1,090 1,140 1,200 1,410 1,560 1,640 11,900

114 Special deduction for teacher expenses 210 180 180 190 220 220 220 230 240 270 270 2,220

115 Discharge of student loan indebtedness 90 90 90 90 90 100 100 100 110 120 130 1,020

116 Qualified school construction bonds 10/ 620 600 570 540 520 490 470 440 410 390 360 4,790

Training, employment, and social services: 

117 Work opportunity tax credit 1,450 1,520 1,100 510 320 240 190 140 100 80 60 4,260

118 Employer provided child care exclusion 720 680 720 780 840 910 990 1,070 1,400 1,610 490 9,490

119 Employer-provided child care credit 10 20 20 20 20 20 20 20 20 20 20 200

120 Assistance for adopted foster children 550 630 680 740 810 880 950 1,020 1,110 1,190 1,290 9,300

121 Adoption credit and exclusion 630 630 700 710 760 780 800 800 810 820 830 7,640

122 4,640 4,260 4,390 4,530 4,700 4,890 5,080 5,400 6,340 6,920 7,200 53,710

123 4,560 4,360 4,460 4,560 4,690 4,870 4,970 5,100 5,330 5,550 5,610 49,500

124 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

125 45,956 36,660 39,540 42,760 45,510 48,270 51,040 53,750 64,790 84,810 88,800 555,930

126 Exclusion of certain foster care payments 480 500 520 530 540 550 560 570 570 580 580 5,500

127 Exclusion of parsonage allowances 839 850 896 943 993 1,046 1,101 1,160 1,221 1,285 1,353 10,848

128 Indian employment credit 40 30 20 20 20 20 10 10 10 10 10 160

Graduated corporation income tax rate 

(normal tax method) 

Special rules for certain film and TV 

production

Allow 20-percent deduction to certain passthrough income

Exclusion of reimbursed employee parking 

expenses 

Exclusion for employer-provided transit 

passes 

Tax credit for certain expenditures for 

maintaining railroad tracks

Exclusion of interest on bonds for Highway 

Projects and rail-truck transfer facilities

Investment credit for rehabilitation of 

structures (other than historic) 

Exclusion of interest for airport, dock, and 

similar bonds

Recovery Zone Bonds 7/

Credit to holders of Gulf Tax Credit Bonds.

Exclusion of scholarship and fellowship 

income (normal tax method) 

Tax credits and deductions for postsecondary 

education expenses 8/

Exclusion of interest on bonds for private 

nonprofit educational facilities 

Exemption of certain mutuals' and 

cooperatives' income 

Empowerment zones

New markets tax credit

Exclusion of employee meals and lodging 

(other than military) 

Credit for child and dependent care expenses 

Deductibility of charitable contributions, other 

than education and health

Credit for holders of zone academy bonds 9/

Exclusion of interest on savings bonds 

Parental personal exemption for students age 

19 or over 

Deductibility of charitable contributions 

(education)

Exclusion of employer-provided educational 

assistance 

U.S. Department of the Treasury 

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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations and individuals

129 0 0 0 0 10 10 20 20 20 20 20 120

Health: 

130 205,080 203,290 214,950 227,350 239,620 253,230 268,240 284,210 333,840 370,750 391,420 2,786,900

131 7,420 7,430 7,910 8,440 8,970 9,450 10,010 10,590 12,520 13,870 14,600 103,790

132 7,410 7,810 8,460 9,080 9,760 10,360 10,880 11,450 13,110 14,240 14,740 109,890

133 Deductibility of medical expenses 8,840 6,890 7,130 7,880 8,740 9,690 10,680 11,700 17,820 22,170 24,200 126,900

134 2,700 2,810 2,930 3,120 3,410 3,680 3,860 3,960 4,210 4,420 4,550 36,950

135 6,790 5,900 5,930 6,000 6,340 6,710 7,050 7,510 8,610 9,330 9,960 73,340

136 80 70 50 40 20 20 10 10 10 10 10 250

137 4,890 3,960 4,270 4,620 4,930 5,230 5,530 5,820 7,050 9,270 9,710 60,390

138 1,960 1,550 1,880 2,290 2,780 3,370 4,090 4,960 6,020 7,310 8,840 43,090

139 Special Blue Cross/Blue Shield tax benefits 270 290 310 340 360 390 410 440 460 490 520 4,010

140 20 10 0 0 0 0 0 0 0 0 0 10

141 430 420 430 450 460 470 490 500 590 630 650 5,090

Income security: 

142 Child credit 15/ 30,450 76,010 76,930 77,910 78,890 79,910 80,780 81,640 57,830 21,450 21,220 652,570

143 250 220 210 200 190 180 170 160 160 170 170 1,830

144 9,590 9,680 9,780 9,880 9,970 10,070 10,170 10,270 10,370 10,480 10,580 101,250

145 580 580 600 620 640 660 670 700 720 740 690 6,620

146 20 20 20 10 10 10 10 10 10 10 10 120

147 Exclusion of military disability pensions 160 160 160 170 170 180 180 180 210 220 220 1,850

148 Defined benefit employer plans 69,910 71,430 73,540 75,290 75,840 76,400 76,830 76,380 77,840 76,440 75,560 755,550

149 Defined contribution employer plans 72,260 75,720 84,590 90,670 97,200 104,080 111,230 118,850 142,180 155,000 164,490 1,144,010

150 Individual Retirement Accounts 19,680 20,620 23,590 24,730 26,510 28,150 29,930 32,000 37,340 40,760 44,170 307,800

151 Low and moderate income savers credit 1,180 1,170 1,180 1,180 1,200 1,190 1,200 1,210 1,330 1,320 1,320 12,300

152 Self-Employed plans 24,940 24,120 26,680 29,680 32,720 35,890 39,260 42,660 50,790 63,450 69,680 414,930

Exclusion of other employee benefits: 

153 Premiums on group term life insurance 2,810 2,810 2,930 3,060 3,190 3,330 3,470 3,630 4,130 4,410 4,590 35,550

154 330 330 330 340 340 340 350 350 350 350 350 3,430

155 30 30 40 40 50 50 50 50 60 60 60 490

156 1,080 1,150 1,230 1,310 1,400 1,490 1,570 1,670 1,860 1,970 2,080 15,730

157 Special ESOP rules 2,020 2,070 2,130 2,180 2,240 2,300 2,370 2,430 2,500 2,560 2,630 23,410

158 Additional deduction for the blind 30 40 40 40 40 40 50 50 50 50 60 460

159 Additional deduction for the elderly 4,230 4,920 5,220 5,590 6,030 6,340 6,750 7,150 6,720 6,690 7,170 62,580

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

161 Deductibility of casualty losses 110 0 0 0 0 0 0 0 390 610 650 1,650

162 Earned income tax credit 16/ 8,050 8,110 2,660 2,710 2,780 2,850 2,940 3,020 3,100 10,520 10,770 49,460

Social Security: 

Exclusion of social security benefits: 

163 32,970 29,980 31,020 32,090 33,340 34,870 35,460 35,530 40,840 48,030 49,850 371,010

164 1,080 1,140 1,200 1,270 1,330 1,400 1,460 1,540 1,610 1,690 1,780 14,420

Veterans benefits and services: 

165 8,240 8,180 8,710 9,060 9,400 9,750 10,100 10,480 11,340 12,860 13,340 103,220

166 Exclusion of veterans pensions 450 420 430 450 470 480 500 520 560 640 660 5,130

167 Exclusion of GI bill benefits 1,650 1,610 1,700 1,780 1,870 1,960 2,050 2,140 2,340 2,680 2,810 20,940

168 40 30 30 40 40 40 40 50 50 50 50 420

General purpose fiscal assistance: 

169 23,130 24,080 25,100 26,740 29,270 31,550 33,060 33,950 36,120 37,870 38,990 316,730

Self-employed medical insurance premiums

Medical Savings Accounts / Health Savings 

Accounts

Exclusion of interest on hospital construction 

bonds

Refundable Premium Assistance Tax Credit 

12/

Credit for employee health insurance 

expenses of small business 13/

Credit for employer differential wage 

payments

Exclusion of employer contributions for 

medical insurance premiums and medical 

Exclusion of workers' compensation benefits

Exclusion of public assistance benefits 

(normal tax method) 

Exclusion of special benefits for disabled coal 

miners 

Premiums on accident and disability 

insurance 

Net exclusion of pension contributions and 

earnings: 

Deductibility of charitable contributions 

(health)

Tax credit for orphan drug research 

Tax credit for health insurance purchased by 

certain displaced and retired individuals 14/

Distributions from retirement plans for 

premiums for health and long-term care 

Exclusion of railroad retirement (Social 

Security equivalent) benefits 

Exclusion of veterans death benefits and 

disability compensation 

Exclusion of interest on veterans housing 

bonds

Exclusion of interest on public purpose State 

and local bonds

Income of trusts to finance supplementary 

unemployment benefits 

Income of trusts to finance voluntary 

employee benefits associations 

Social Security benefits for retired and 

disabled workers and spouses, dependents 

Credit for certain employer contributions to 

social security

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

25
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations and individuals

170 Build America Bonds 17/ 0 0 0 0 0 0 0 0 0 0 0 0

171 22,330 4,610 7,520 8,000 8,460 8,880 9,280 9,590 84,070 125,130 132,330 397,870

Interest: 

172 Deferral of interest on U.S. savings bonds 950 850 840 840 830 820 810 800 790 890 900 8,370

Deductibility of: 

Property taxes on owner-occupied homes 15,360 6,250 6,650 7,100 7,520 7,930 8,300 8,630 42,220 61,210 65,030 220,840

22,330 4,610 7,520 8,000 8,460 8,880 9,280 9,590 84,070 125,130 132,330 397,870

Public purposes 23,130 24,080 25,100 26,740 29,270 31,550 33,060 33,950 36,120 37,870 38,990 316,730

Energy facilities 10 10 10 10 10 10 10 10 10 20 20 120

320 340 350 370 410 440 460 470 500 530 540 4,410

Small-issues 120 120 120 130 140 150 160 170 180 190 200 1,560

Owner-occupied mortgage subsidies 890 920 960 1,020 1,110 1,200 1,260 1,300 1,380 1,440 1,490 12,080

Rental housing 910 960 990 1,060 1,160 1,250 1,310 1,340 1,430 1,490 1,550 12,540

Airports, docks, and similar facilities 560 570 610 640 700 760 790 820 870 910 930 7,600

Student loans 240 250 260 280 300 330 340 350 380 390 410 3,290

Private nonprofit educational facilities 1,830 1,900 1,990 2,110 2,310 2,500 2,620 2,690 2,860 3,000 3,080 25,060

Hospital construction 2,700 2,810 2,930 3,120 3,410 3,680 3,860 3,960 4,210 4,420 4,550 36,950

Veterans' housing 40 30 30 40 40 40 40 50 50 50 50 420

1/

2/ The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2018 $710 and $0 thereafter.

3/ In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2018 $3,410 and $0 thereafter.

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

2018 $40; 2019 $40; 2020 $40; 2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025, $40; 2026 $40; 2017 $40; and 2028 $40.

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

2018 $40; 2019 $40; 2020 $40; 2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025, $40; 2026 $40; 2027 $40; and 2028 $40.

6/

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

2018 $290; 2019 $290; 2020 $290; 2021 $290; 2022 $290; 2023 $290; 2024 $290; 2025, $290; 2026 $290; 2027 $290; and 2028 $290.

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

2018 $3860; 2019 $4040; 2020 $4000; 2021 $3870; 2022 $3760; 2023 $3730; 2024 $3720; 2025 $3700; 2026 $3670; 2027 $3330; and 2028 $3200.

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

2018 $60; 2019 $60; 2020 $60; 2021 $60; 2022 $60; 2023 $60; 2024 $60; 2025 $60; 2026 $60; 2027 $60; and 2028 $60.

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

2018 $795; 2019 $795; 2020 $795; 2021 $795; 2022 $795; 2023 $795; 2024 $795; 2025 $795; 2026 $795; 2027 $795; and 2028 $795.

11/

12/

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

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

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

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

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

 2018 $3,980; 2019 $9,560; 2020 $9,750; 2021 $9,920; 2022 $10,060; 2023 $10,280; 2024 $10,380; 2025 $10,430; 2026 $3,180; 2027 $0; and 2028 $0.

16/

17/

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

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

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 owner occupied housing and other taxes. The estimate of repealing both is (in millions of dollars): 2018 $41,090; 2019 $17,360; 2020 $21,470; 2021 

$23,310; 2022 $25,200; 2023 $27,060; 2024 $28,880; 2025 $30,540; 2026 $131,460; 2027 $187,990; and 2028 $199,290.

In addition, the employer contributions for health have effects on payroll tax receipts (in millions of dollars) as follows: 2018 $131850; 2019 $136,880; 2020 $143,060; 2021 

$149,500; 2022 $156,100; 2023 $163,730; 2024 $172,170; 2025 $180,970; 2026 $189,960; 2027 $199,570; and 2028 $209,850. 

In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows: '2018 $39,550; 2019 $37,480; 2020 $36,480; 2021 $37,520; 2022 

$39,080; 2023 $40,810; 2024 $42,640; 2025 $44,510; 2026 $45,690; 2027 $47,370; and 2028 $49,350. 

In addition, the effect of the child tax credit on receipts has outlay effects of (in millions of dollars): 2018 $35,000; 2019 $44,960; 2020 $45,470; 2021 $45,720; 2022 $45,950; 

2023 $47,630; 2024 $47,630; 2025 $47,890; 2026 $49,550; 2027 $30,970; and 2028 $30,940.

In addition, the earned income tax credit on receipts has outlay effects of (in millions of dollars): '2018 $58,500; 2019 $ 60,250; 2020 $66,680; 2021 $67,740; 2022 $68,910; 

2023 $70,210; 2024 $71,600; 2025 $72,820; 2026 $73,529; 2027 $67,380; and 2028 68,460.

In addition, the Build America Bonds have outlay effects of (in millions of dollars): 2018 $3,610; 2019 $3,610; 2020 $3,610; 2021 $3,610; 2022 $3,610; 2023 $3,610; 2024 

$3,610; 2025, $3,610; 2026 $3,610; 2027 $3,610; and 2028 $3,610.

Nonbusiness State and local taxes other than 

on owner-occupied homes 

Water, sewage, and hazardous waste 

disposal facilities 

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

effect of the grant on outlays (in millions of dollars) is as follows: 2018 $48; and $0 thereafter.

Exclusion of interest on State and local bonds 

for: 

Addendum: Aid to State and local 

governments: 

Deductibility of nonbusiness State and local 

taxes other than on owner-occupied homes 

6/

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

26
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

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

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

4 Inventory property sales source rules exception 1,250 0 0 0 0 0 0 0 0 0 0 0

5 63,400 34,490 38,950 41,870 43,500 34,020 20,510 9,410 45,150 73,890 77,270 419,060

6 4,290 7,420 7,970 9,730 10,990 11,440 11,950 12,490 9,090 6,880 7,220 95,180

7 Interest Charge Domestic International Sales Corporations (IC-DISCs) 1,220 1,280 1,340 1,410 1,480 1,560 1,630 1,720 1,800 1,890 1,990 16,100

General science, space, and technology: 

8 7,670 6,020 6,630 7,510 -25,180 -40,820 -29,740 -17,890 -5,210 0 0 -98,680

9 Credit for increasing research activities 11,880 12,850 14,100 15,390 16,640 17,870 19,110 20,390 21,680 22,990 24,320 185,340

Energy: 

10 Expensing of exploration and development costs, fuels 420 370 360 330 310 310 310 320 430 520 540 3,800

11 Excess of percentage over cost depletion, fuels 250 210 300 380 420 440 470 490 520 540 560 4,330

12 0 0 0 0 0 0 0 0 0 0 0 0

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

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

15 Enhanced oil recovery credit 310 420 460 500 530 600 650 680 680 670 650 5,840

16 Energy production credit 1/ 2,360 2,430 2,490 2,630 2,760 2,820 2,780 2,680 2,330 2,040 1,770 24,730

17 Marginal wells credit 0 0 20 20 30 40 60 70 80 90 100 510

18 Energy investment credit 1/ 2,400 3,240 3,850 3,960 3,520 2,740 1,870 1,300 950 790 740 22,960

19 Alcohol fuel credits 2/ 0 0 0 0 0 0 0 0 0 0 0 0

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

21 Tax credits for clean-fuel burning vehicles and refueling property 260 200 130 110 110 100 80 60 50 40 40 920

22 Exclusion of utility conservation subsidies 20 20 20 20 20 20 20 20 20 20 20 200

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

24 -80 -120 -100 -80 -60 -40 -10 0 0 0 0 -410

25 Credit for investment in clean coal facilities 80 50 30 60 140 390 470 320 190 100 30 1,780

26 Temporary 50% expensing for equipment used in the refining of liquid fuels -820 -460 -370 -280 -190 -90 -20 0 0 0 0 -1,410

27 Natural gas distribution pipelines treated as 15-year property 100 70 70 50 30 -10 -50 -80 -120 -140 -140 -320

28 Amortize all geological and geophysical expenditures over 2 years 140 110 110 120 130 140 140 150 160 160 170 1,390

29 10 0 0 0 0 0 0 0 0 0 0 0

30 Credit for construction of new energy efficient homes 40 10 0 0 0 0 0 0 0 0 0 10

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

32 Credit for residential energy efficient property 0 0 0 0 0 0 0 0 0 0 0 0

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

34 Advanced Energy Property Credit 0 10 10 10 20 20 20 20 20 20 20 170

35 Advanced nuclear power production credit 0 80 200 300 340 340 340 140 0 0 0 1,740

36 Reduced tax rate for nuclear decommissioning funds 90 100 100 110 110 120 120 130 130 140 150 1,210

Natural resources and environment: 

37 Expensing of exploration and development costs, nonfuel minerals 30 10 20 20 30 40 30 20 20 20 30 240

38 Excess of percentage over cost depletion, nonfuel minerals 280 210 210 210 210 220 230 240 250 260 260 2,300

39 50 40 30 30 30 30 30 30 20 20 20 280

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

41 Expensing of multiperiod timber growing costs 110 90 90 100 100 110 110 120 120 130 140 1,110

42 Tax incentives for preservation of historic structures 230 120 210 310 420 460 470 480 490 500 510 3,970

43 Carbon oxide sequestration credit 200 110 70 120 190 260 350 440 540 630 720 3,430

44 Deduction for endangered species recovery expenditures 10 10 10 10 10 10 10 10 10 20 20 120

Agriculture: 

45 Expensing of certain capital outlays 10 10 10 10 10 10 10 10 10 10 10 100

46 Expensing of certain multiperiod production costs 10 10 10 10 10 10 10 10 10 10 10 100

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

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

49 Income averaging for farmers 0 0 0 0 0 0 0 0 0 0 0 0

50 Deferral of gain on sale of farm refiners 15 15 15 15 15 15 20 20 20 20 20 175

51 Expensing of reforestation expenditures 10 0 10 10 10 10 10 10 10 10 10 90

Commerce and housing: 

Financial institutions and insurance: 

52 Exemption of credit union income 2,380 1,861 2,010 2,097 2,214 2,340 2,411 2,511 2,692 2,865 3,016 24,017

53 Exclusion of life insurance death benefits 1,260 1,320 1,390 1,460 1,530 1,610 1,690 1,780 1,870 1,960 2,050 16,660

54 30 40 40 40 40 50 50 50 60 60 60 490

55 Tax exemption of insurance income earned by tax-exempt organizations 480 320 330 340 350 360 370 380 400 410 420 3,680

56 Small life insurance company deduction 10 0 0 0 0 0 0 0 0 0 0 0

57 Exclusion of interest spread of financial institutions 0 0 0 0 0 0 0 0 0 0 0 0

Housing: 

58 Exclusion of interest on owner-occupied mortgage subsidy bonds 140 100 90 80 80 80 80 80 60 50 60 760

59 Exclusion of interest on rental housing bonds 140 110 90 80 90 90 90 80 60 50 60 800

60 Deductibility of mortgage interest on owner-occupied homes 0 0 0 0 0 0 0 0 0 0 0 0

61 Deductibility of State and local property tax on owner-occupied homes 6/ 0 0 0 0 0 0 0 0 0 0 0 0

62 Deferral of income from installment sales 0 0 0 0 0 0 0 0 0 0 0 0

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations

Deferral of gain from dispositions of transmission property to implement FERC 

restructuring policy

Deduction for foreign-derived intangible income dervied from trade or business 

within the U.S.

Reduced tax rate on active income of controlled foreign corporations (normal 

tax method)

Exemption or special alternative tax for small property and casualty insurance 

companies 

Exclusion of interest on bonds for water, sewage, and hazardous waste 

facilities

Allowance of deduction for certain energy efficient commercial building property

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

properties 

Expensing of research and experimentation expenditures (normal tax method) 

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

27
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations

63 Capital gains exclusion on home sales 0 0 0 0 0 0 0 0 0 0 0 0

64 Exclusion of net imputed rental income 0 0 0 0 0 0 0 0 0 0 0 0

65 Exception from passive loss rules for $25,000 of rental loss 0 0 0 0 0 0 0 0 0 0 0 0

66 Credit for low-income housing investments 8,680 8,590 8,620 8,770 8,940 9,140 9,380 9,620 9,910 10,200 10,410 93,580

67 Accelerated depreciation on rental housing (normal tax method) 290 280 330 400 470 540 600 660 720 780 850 5,630

68 Discharge of mortgage indebtedness 0

Commerce: 

69 Discharge of business indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

70 Exceptions from imputed interest rules 0 0 0 0 0 0 0 0 0 0 0 0

71 Treatment of qualified dividends 0 0 0 0 0 0 0 0 0 0 0 0

72 Capital gains (except agriculture, timber, iron ore, and coal) 0 0 0 0 0 0 0 0 0 0 0 0

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

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

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

76 0 0 0 0 0 0 0 0 0 0 0 0

77 Deferral of gains from like-kind exchanges 5,050 1,000 1,040 1,100 1,150 1,210 1,270 1,330 1,400 1,460 1,530 12,490

78 Depreciation of buildings other than rental housing (normal tax method) -2,530 -2,020 -2,140 -2,260 -2,400 -2,530 -2,690 -2,790 -2,890 -3,000 -3,150 -25,870

79 Accelerated depreciation of machinery and equipment (normal tax method) 37,180 35,470 33,880 33,110 32,920 23,450 12,870 4,830 -2,110 -8,500 -1,730 164,190

80 Expensing of certain small investments (normal tax method) -10 30 130 190 240 590 1,000 1,320 1,610 1,870 1,690 8,670

81 Graduated corporation income tax rate (normal tax method) 380 0 0 0 0 0 0 0 0 0 0 0

82 Exclusion of interest on small issue bonds 20 10 10 10 10 10 10 10 10 10 10 100

83 Deduction for US production activities 2,580 0 0 0 0 0 0 0 0 0 0 0

84 Special rules for certain film and TV production 1,060 -200 -190 -160 -150 -160 -120 -50 -20 -10 -10 -1,070

85 Allow 20-percent deduction to certain pass-through income 0 0 0 0 0 0 0 0 0 0 0 0

Transportation: 

86 Tonnage tax 80 90 90 90 100 100 110 110 120 130 130 1,070

87 Deferral of tax on shipping companies 12 12 12 12 12 12 12 12 12 12 12 120

88 Exclusion of reimbursed employee parking expenses -1,060 -1,101 -1,136 -1,171 -1,225 -1,247 -1,278 -1,319 -1,358 -1,396 -1,437 -12,668

89 Exclusion for employer-provided transit passes -341 -362 -383 -406 -435 -454 -476 -505 -532 -562 -592 -4,707

90 Tax credit for certain expenditures for maintaining railroad tracks 100 30 30 10 10 10 10 10 0 0 0 110

91 50 40 40 40 40 30 30 30 30 30 20 330

Community and regional development: 

92 Investment credit for rehabilitation of structures (other than historic) 0 0 0 0 0 0 0 0 0 0 0 0

93 Exclusion of interest for airport, dock, and similar bonds 90 60 60 50 50 50 50 50 40 30 30 470

94 Exemption of certain mutuals' and cooperatives' income 110 90 90 100 100 100 100 110 110 110 110 1,020

95 Empowerment zones 60 40 30 10 10 10 10 10 0 0 0 120

96 New markets tax credit 1,380 1,290 1,250 1,180 1,070 860 550 280 70 -120 -250 6,180

97 Credit to holders of Gulf Tax Credit Bonds. 30 20 20 10 10 10 10 10 10 10 0 110

98 Recovery Zone Bonds 7/ 10 10 10 10 10 10 10 10 0 0 0 70

99 Tribal Economic Development Bonds 0 0 0 0 0 0 0 0 0 0 0 0

100 Opportunity Zones 250 930 910 770 640 550 550 530 -2,410 -1,630 200 1,040

101 Employee retention credit 340 130 40 30 30 20 20 20 10 10 10 320

Education, training, employment, and social services: 

Education: 

100 Exclusion of scholarship and fellowship income (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

101 Tax credits and deductions for postsecondary education expenses 8/ 0 0 0 0 0 0 0 0 0 0 0 0

102 Education Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

103 Deductibility of student-loan interest 0 0 0 0 0 0 0 0 0 0 0 0

104 Qualified tuition programs 0 0 0 0 0 0 0 0 0 0 0 0

105 Exclusion of interest on student-loan bonds 40 30 20 20 20 20 20 20 20 10 20 200

106 Exclusion of interest on bonds for private nonprofit educational facilities 280 210 190 160 170 180 180 160 120 110 110 1,590

107 Credit for holders of zone academy bonds 9/ 180 170 150 130 110 90 80 60 50 50 40 930

108 0 0 0 0 0 0 0 0 0 0 0 0

109 Parental personal exemption for students age 19 or over 0 0 0 0 0 0 0 0 0 0 0 0

110 Deductibility of charitable contributions (education) 990 570 600 620 660 690 730 760 800 830 860 7,120

111 Exclusion of employer-provided educational assistance 0 0 0 0 0 0 0 0 0 0 0 0

112 Special deduction for teacher expenses 0 0 0 0 0 0 0 0 0 0 0 0

113 Discharge of student loan indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

114 Qualified school construction bonds 10/ 150 150 140 130 130 120 120 110 100 100 90 1,190

Training, employment, and social services: 

115 Work opportunity tax credit 1,070 1,130 780 390 250 190 150 110 80 60 50 3,190

116 Employer provided child care exclusion 0 0 0 0 0 0 0 0 0 0 0 0

117 Employer-provided child care credit 10 20 20 20 20 20 20 20 20 20 20 200

118 Assistance for adopted foster children 0 0 0 0 0 0 0 0 0 0 0 0

119 Adoption credit and exclusion 0 0 0 0 0 0 0 0 0 0 0 0

120 Exclusion of employee meals and lodging (other than military) -160 -280 -290 -310 -330 -340 -360 -380 -400 -420 -440 -3,550

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

122 Credit for disabled access expenditures 0 0 0 0 0 0 0 0 0 0 0 0

123 Deductibility of charitable contributions, other than education and health 2,046 1,160 1,210 1,250 1,300 1,350 1,400 1,460 1,520 1,580 1,640 13,870

124 Exclusion of certain foster care payments 0 0 0 0 0 0 0 0 0 0 0 0

125 Exclusion of parsonage allowances 0 0 0 0 0 0 0 0 0 0 0 0

126 Indian employment credit 20 10 10 10 10 10 0 0 0 0 0 50

127 Credit for employer differential wage payments 0 0 0 0 10 10 10 10 10 10 10 70

Health: 

128 0 0 0 0 0 0 0 0 0 0 0 0

129 Self-employed medical insurance premiums 0 0 0 0 0 0 0 0 0 0 0 0

130 Medical Savings Accounts / Health Savings Accounts 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of employer contributions for medical insurance premiums and 

medical care 11/

Exclusion of interest on savings bonds redeemed to finance educational 

expenses

Exclusion of interest on bonds for Highway Projects and rail-truck transfer 

facilities

Ordinary income treatment of loss from small business corporation stock sale 

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

28
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from corporations

131 Deductibility of medical expenses 0 0 0 0 0 0 0 0 0 0 0 0

132 Exclusion of interest on hospital construction bonds 420 310 280 240 250 260 260 240 180 160 170 2,350

133 Refundable Premium Assistance Tax Credit 12/ 0 0 0 0 0 0 0 0 0 0 0 0

134 Credit for employee health insurance expenses of small business 13/ 10 10 10 10 0 0 0 0 0 0 0 30

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

136 Tax credit for orphan drug research 1,930 1,520 1,840 2,240 2,720 3,300 4,010 4,860 5,910 7,180 8,690 42,270

137 Special Blue Cross/Blue Shield tax benefits 270 290 310 340 360 390 410 440 460 490 520 4,010

138 0 0 0 0 0 0 0 0 0 0 0 0

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

Income security: 

140 Child credit 14/ 0 0 0 0 0 0 0 0 0 0 0 0

141 Exclusion of railroad retirement (Social Security equivalent) benefits 0 0 0 0 0 0 0 0 0 0 0 0

142 Exclusion of workers' compensation benefits 0 0 0 0 0 0 0 0 0 0 0 0

143 Exclusion of public assistance benefits (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

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

145 Exclusion of military disability pensions 0 0 0 0 0 0 0 0 0 0 0 0

Net exclusion of pension contributions and earnings: 

146 Defined benefit employer plans 0 0 0 0 0 0 0 0 0 0 0 0

147 Defined contribution employer plans 0 0 0 0 0 0 0 0 0 0 0 0

148 Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

149 Low and moderate income savers credit 0 0 0 0 0 0 0 0 0 0 0 0

150 Self-Employed plans 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of other employee benefits: 

151 Premiums on group term life insurance 0 0 0 0 0 0 0 0 0 0 0 0

152 Premiums on accident and disability insurance 0 0 0 0 0 0 0 0 0 0 0 0

153 Income of trusts to finance supplementary unemployment benefits 0 0 0 0 0 0 0 0 0 0 0 0

154 Income of trusts to finance voluntary employee benefits associations 0 0 0 0 0 0 0 0 0 0 0 0

155 Special ESOP rules 1,900 1,950 2,000 2,050 2,100 2,160 2,220 2,280 2,340 2,400 2,460 21,960

156 Additional deduction for the blind 0 0 0 0 0 0 0 0 0 0 0 0

157 Additional deduction for the elderly 0 0 0 0 0 0 0 0 0 0 0 0

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

159 Deductibility of casualty losses 0 0 0 0 0 0 0 0 0 0 0 0

160 Earned income tax credit 15/ 0 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 

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

162 Credit for certain employer contributions to social security 510 540 570 600 630 660 690 730 760 800 840 6,820

Veterans benefits and services: 

163 Exclusion of veterans death benefits and disability compensation 0 0 0 0 0 0 0 0 0 0 0 0

164 Exclusion of veterans pensions 0 0 0 0 0 0 0 0 0 0 0 0

165 Exclusion of GI bill benefits 0 0 0 0 0 0 0 0 0 0 0 0

166 Exclusion of interest on veterans housing bonds 10 0 0 0 0 0 0 0 0 0 0 0

General purpose fiscal assistance: 

167 Exclusion of interest on public purpose State and local bonds 3,580 2,690 2,370 2,050 2,180 2,220 2,220 2,030 1,570 1,360 1,440 20,130

168 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

169 0 0 0 0 0 0 0 0 0 0 0 0

Interest: 

170 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

Nonbusiness State and local taxes other than on owner-occupied homes 

0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of interest on State and local bonds for: 

Public purposes 3,580 2,690 2,370 2,050 2,180 2,220 2,220 2,030 1,570 1,360 1,440 20,130

Energy facilities 0 0 0 0 0 0 0 0 0 0 0 0

50 40 30 30 30 30 30 30 20 20 20 280

Small-issues 20 10 10 10 10 10 10 10 10 10 10 100

Owner-occupied mortgage subsidies 140 100 90 80 80 80 80 80 60 50 60 760

Rental housing 140 110 90 80 90 90 90 80 60 50 60 800

Airports, docks, and similar facilities 90 60 60 50 50 50 50 50 40 30 30 470

Student loans 40 30 20 20 20 20 20 20 20 10 20 200

Private nonprofit educational facilities 280 210 190 160 170 180 180 160 120 110 110 1,590

Hospital construction 420 310 280 240 250 260 260 240 180 160 170 2,350

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

See Table 1 footnotes for specific table information

Water, sewage, and hazardous waste disposal facilities 

Social Security benefits for retired and disabled workers and spouses, 

dependents and survivors

Tax credit for health insurance purchased by certain displaced and retired 

individuals 14/

Distributions from retirement plans for premiums for health and long-term care 

insurance

Deductibility of nonbusiness State and local taxes other than on owneroccupied homes 

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

29
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 12,030 12,450 11,220 11,240 11,590 12,050 12,550 13,090 13,660 14,270 14,920 127,040

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,930 7,280 7,640 8,020 8,420 8,840 9,290 9,750 10,240 10,750 11,290 91,520

3 Exclusion of certain allowances for Federal employees abroad 240 250 260 280 290 300 320 330 350 370 390 3,140

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

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

0

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

0

7 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: 

8 840 730 800 910 -1,290 -5,470 -4,110 -2,650 -1,090 0 0 -12,170

9 Credit for increasing research activities 1,430 1,630 1,770 1,920 2,070 2,210 2,370 2,540 2,710 2,900 3,100 23,220

Energy: 

10 Expensing of exploration and development costs, fuels 550 480 460 420 400 400 400 420 580 710 730 5,000

11 Excess of percentage over cost depletion, fuels 100 80 110 150 170 180 190 210 290 350 360 2,090

12 10 0 0 0 10 10 10 10 10 10 10

70

13 Capital gains treatment of royalties on coal 160 140 130 130 140 140 150 150 170 190 200 1,540

14 Exclusion of interest on energy facility bonds 10 10 10 10 10 10 10 10 10 20 20 120

15 Enhanced oil recovery credit 80 100 110 120 130 150 160 170 170 170 160 1,440

16 Energy production credit 1/ 790 810 830 880 920 940 930 890 780 680 590 8,250

17 Marginal wells credit 0 0 50 50 60 100 130 160 190 210 230 1,180

18 Energy investment credit 1/ 780 1,060 1,250 1,290 1,130 880 590 400 280 240 230 7,350

19 Alcohol fuel credits 2/ 10 0 0 0 0 0 0 0 0 0 0 0

20 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 20 0 0 0 0 0 0 0 0 0 0 0

21 Tax credits for clean-fuel burning vehicles and refueling property 480 440 320 250 250 250 230 180 150 130 120 2,320

22 Exclusion of utility conservation subsidies 410 430 450 470 490 520 550 570 600 630 660 5,370

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

24 0 0 0 0 0 0 0 0 0 0 0

0

25 Credit for investment in clean coal facilities 10 10 0 10 20 40 50 30 20 10 0 190

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

27 Natural gas distribution pipelines treated as 15-year property 0 0 0 0 0 0 0 0 0 0 0 0

28 Amortize all geological and geophysical expenditures over 2 years 90 70 70 70 80 80 90 100 130 160 170 1,020

29 30 10 0 0 0 0 0 0 0 0 0 10

30 Credit for construction of new energy efficient homes 80 40 10 0 0 0 0 0 0 0 0 50

31 Credit for energy efficiency improvements to existing homes 260 0 0 0 0 0 0 0 0 0 0 0

32 Credit for residential energy efficient property 1,900 1,530 1,180 770 190 30 0 0 0 0 0 3,700

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

34 Advanced Energy Property Credit 0 0 0 0 0 0 0 0 0 0 0 0

35 Advanced nuclear power production credit 0 0 0 0 0 0 0 0 0 0 0 0

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

Natural resources and environment: 

37 Expensing of exploration and development costs, nonfuel minerals 20 10 10 10 20 20 20 10 20 20 20 160

38 Excess of percentage over cost depletion, nonfuel minerals 50 40 40 40 40 40 40 40 60 70 70 480

39 270 300 320 340 380 410 430 440 480 510 520

4,130

40 160 140 130 130 140 140 150 150 170 190 200 1,540

41 Expensing of multiperiod timber growing costs 110 110 120 120 130 140 140 150 170 190 200 1,470

42 Tax incentives for preservation of historic structures 60 20 30 40 50 60 60 70 70 70 80 550

43 Carbon oxide sequestration credit 0 0 0 0 0 0 0 0 0 0 0 0

44 Deduction for endangered species recovery expenditures 20 20 20 20 20 20 30 30 30 40 40 270

Agriculture: 

45 Expensing of certain capital outlays 150 140 150 160 170 180 180 190 240 270 280 1,960

46 Expensing of certain multiperiod production costs 250 240 260 270 280 300 310 330 410 450 470 3,320

47 Treatment of loans forgiven for solvent farmers 30 30 30 30 40 40 40 40 70 70 70 460

48 Capital gains treatment of certain agriculture income 1,590 1,380 1,330 1,340 1,370 1,410 1,470 1,540 1,720 1,900 1,990 15,450

49 Income averaging for farmers 100 110 110 120 120 130 130 140 230 230 230 1,550

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

51 Expensing of reforestation expenditures 40 50 50 60 60 70 70 70 80 90 90 690

Commerce and housing: 

Financial institutions and insurance: 

52 Exemption of credit union income 0 0 0 0 0 0 0 0 0 0 0 0

53 Exclusion of life insurance death benefits 12,250 13,030 14,160 15,140 15,990 16,850 17,700 18,560 19,820 21,520 22,580 175,350

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

0

55 Tax exemption of insurance income earned by tax-exempt organizations 0 0 0 0 0 0 0 0 0 0 0 0

56 Small life insurance company deduction 0 0 0 0 0 0 0 0 0 0 0 0

57 Exclusion of interest spread of financial institutions 3,900 2,250 1,170 1,210 1,240 1,280 1,310 1,350 1,420 1,480 1,530 14,240

Housing: 

58 Exclusion of interest on owner-occupied mortgage subsidy bonds 750 820 870 940 1,030 1,120 1,180 1,220 1,320 1,390 1,430 11,320

59 Exclusion of interest on rental housing bonds 770 850 900 980 1,070 1,160 1,220 1,260 1,370 1,440 1,490 11,740

60 Deductibility of mortgage interest on owner-occupied homes 37,160 26,850 29,820 33,090 36,340 39,480 42,480 45,170 93,380 121,910 129,090 597,610

61 Deductibility of State and local property tax on owner-occupied homes 6/ 15,360 6,250 6,650 7,100 7,520 7,930 8,300 8,630 42,220 61,210 65,030 220,840

62 Deferral of income from installment sales 1,700 1,720 1,750 1,790 1,840 1,910 2,000 2,090 2,190 2,290 2,400 19,980

63 Capital gains exclusion on home sales 43,760 44,380 46,600 49,000 51,470 54,020 56,690 59,430 67,070 72,600 76,070 577,330

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from individuals

Deferral of gain from dispositions of transmission property to implement FERC 

restructuring policy

Reduced tax rate on active income of controlled foreign corporations (normal 

tax method)

Deduction for foreign-derived intangible income dervied from trade or business 

within the U.S.

Expensing of research and experimentation expenditures (normal tax method) 

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

properties 

Allowance of deduction for certain energy efficient commercial building 

property

Capital gains treatment of certain timber income 

Exclusion of interest on bonds for water, sewage, and hazardous waste 

facilities

Exemption or special alternative tax for small property and casualty insurance 

companies 

Temporary 50% expensing for equipment used in the refining of liquid fuels

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

30
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from individuals

64 Exclusion of net imputed rental income 116,590 121,070 125,610 129,970 134,030 138,090 142,130 146,710 188,840 199,400 210,190 1,536,040

65 Exception from passive loss rules for $25,000 of rental loss 5,720 6,030 6,390 6,750 7,090 7,400 7,720 8,380 9,330 9,690 10,060 78,840

66 Credit for low-income housing investments 460 450 450 460 470 480 490 510 520 540 550 4,920

67 Accelerated depreciation on rental housing (normal tax method) 2,170 2,530 3,080 3,730 4,420 5,060 5,660 6,260 7,780 8,910 9,650 57,080

68 Discharge of mortgage indebtedness 210 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

69 Discharge of business indebtedness -50 10 50 50 40 30 20 20 40 50 50 360

70 Exceptions from imputed interest rules 50 60 60 70 70 70 70 70 90 90 90 740

71 Treatment of qualified dividends 29,690 28,730 29,820 31,190 32,860 34,850 37,130 39,690 45,080 50,720 54,050 384,120

72 Capital gains (except agriculture, timber, iron ore, and coal) 118,630 102,910 99,210 99,890 101,950 105,290 109,710 114,910 128,090 141,870 148,780 1,152,610

73 Capital gains exclusion of small corporation stock 1,010 1,240 1,410 1,530 1,640 1,750 1,850 1,930 2,000 2,080 2,160 17,590

74 Step-up basis of capital gains at death 46,730 49,920 51,840 53,630 56,160 58,980 62,450 66,040 69,900 74,220 79,050 622,190

75 Carryover basis of capital gains on gifts 3,330 3,040 3,030 2,930 2,830 2,740 2,710 2,720 2,950 3,180 3,220 29,350

76 70 70 70 70 70 70 80 80 80 80 90 760

77 Deferral of gains from like-kind exchanges 1,750 1,850 1,940 2,040 2,140 2,250 2,360 2,480 2,600 2,730 2,870 23,260

78 Depreciation of buildings other than rental housing (normal tax method) -5,600 -5,580 -5,970 -6,370 -6,770 -7,180 -7,630 -7,990 -9,050 -9,800 -10,310 -76,650

79 Accelerated depreciation of machinery and equipment (normal tax method) 30,640 33,280 31,530 30,780 30,630 20,380 8,830 0 -8,640 -16,910 -8,650 121,230

80 Expensing of certain small investments (normal tax method) 1,440 1,630 2,160 2,500 2,760 3,950 5,350 6,550 8,670 10,400 10,240 54,210

81 Graduated corporation income tax rate (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

82 Exclusion of interest on small issue bonds 100 110 110 120 130 140 150 160 170 180 190 1,460

83 Deduction for US production activities 1,030 0 0 0 0 0 0 0 0 0 0 0

84 Special rules for certain film and TV production 270 -50 -50 -40 -40 -40 -30 -10 0 0 0 -260

85 Allow 20-percent deduction to certain pass-through income 34,065 53,273 57,429 61,260 64,855 68,493 72,260 76,707 25,831 0 0 480,108

Transportation: 

86 Tonnage tax 0 0 0 0 0 0 0 0 0 0 0 0

87 Deferral of tax on shipping companies 0 0 0 0 0 0 0 0 0 0 0 0

88 Exclusion of reimbursed employee parking expenses 3,180 3,302 3,407 3,514 3,674 3,742 3,833 3,958 4,075 4,189 4,311 38,005

89 Exclusion for employer-provided transit passes 681 725 766 813 870 907 951 1,010 1,064 1,124 1,184 9,414

90 Tax credit for certain expenditures for maintaining railroad tracks 30 10 10 10 10 0 0 0 0 0 0 40

91 140 130 130 120 120 110 110 100 100 90 90 1,100

Community and regional development: 

92 Investment credit for rehabilitation of structures (other than historic) 10 10 0 0 0 0 0 0 0 0 0 10

93 Exclusion of interest for airport, dock, and similar bonds 470 510 550 590 650 710 740 770 830 880 900 7,130

94 Exemption of certain mutuals' and cooperatives' income 0 0 0 0 0 0 0 0 0 0 0 0

95 Empowerment zones 50 10 10 0 0 0 0 0 0 0 0 20

96 New markets tax credit 30 30 30 30 20 20 20 10 10 0 0 170

97 Credit to holders of Gulf Tax Credit Bonds. 140 150 150 150 160 160 150 150 140 140 130 1,480

98 Recovery Zone Bonds 7/ 80 80 80 80 80 90 80 80 80 70 70 790

99 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 10 100

100 Opportunity Zones 210 1,050 1,600 1,080 1,090 790 840 790 -1,630 -4,300 290 1,600

101 Employee retention credit 120 70 20 10 10 10 10 10 10 10 0 160

Education, training, employment, and social services: 

Education: 

100 Exclusion of scholarship and fellowship income (normal tax method) 3,070 2,840 2,960 3,100 3,250 3,400 3,550 3,720 4,110 4,730 4,920 36,580

101 Tax credits and deductions for postsecondary education expenses 8/ 17,450 16,300 16,360 16,490 16,550 16,590 16,550 16,440 16,490 17,220 17,280 166,270

102 Education Individual Retirement Accounts 30 40 40 40 40 40 40 30 30 30 30 360

103 Deductibility of student-loan interest 2,300 1,980 2,030 2,060 2,090 2,110 2,150 2,190 2,280 2,700 2,730 22,320

104 Qualified tuition programs 2,090 2,200 2,420 2,650 2,920 3,240 3,630 4,110 5,050 6,050 7,170 39,440

105 Exclusion of interest on student-loan bonds 200 220 240 260 280 310 320 330 360 380 390 3,090

106 Exclusion of interest on bonds for private nonprofit educational facilities 1,550 1,690 1,800 1,950 2,140 2,320 2,440 2,530 2,740 2,890 2,970 23,470

107 Credit for holders of zone academy bonds 9/ 0 0 0 0 0 0 0 0 0 0 0 0

108 30 30 30 40 40 40 40 40 50 50 50 410

109 Parental personal exemption for students age 19 or over 2,860 0 0 0 0 0 0 0 5,820 8,790 8,940 23,550

110 Deductibility of charitable contributions (education) 4,410 3,570 3,850 4,170 4,440 4,720 4,990 5,260 6,360 8,370 8,760 54,490

111 Exclusion of employer-provided educational assistance 880 890 940 990 1,040 1,090 1,140 1,200 1,410 1,560 1,640 11,900

112 Special deduction for teacher expenses 210 180 180 190 220 220 220 230 240 270 270 2,220

113 Discharge of student loan indebtedness 90 90 90 90 90 100 100 100 110 120 130 1,020

114 Qualified school construction bonds 10/ 470 450 430 410 390 370 350 330 310 290 270 3,600

Training, employment, and social services: 

115 Work opportunity tax credit 380 390 320 120 70 50 40 30 20 20 10 1,070

116 Employer provided child care exclusion 720 680 720 780 840 910 990 1,070 1,400 1,610 490 9,490

117 Employer-provided child care credit 0 0 0 0 0 0 0 0 0 0 0 0

118 Assistance for adopted foster children 550 630 680 740 810 880 950 1,020 1,110 1,190 1,290 9,300

119 Adoption credit and exclusion 630 630 700 710 760 780 800 800 810 820 830 7,640

120 Exclusion of employee meals and lodging (other than military) 4,800 4,540 4,680 4,840 5,030 5,230 5,440 5,780 6,740 7,340 7,640 57,260

121 Credit for child and dependent care expenses 4,560 4,360 4,460 4,560 4,690 4,870 4,970 5,100 5,330 5,550 5,610 49,500

122 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

123 Deductibility of charitable contributions, other than education and health 43,910 35,500 38,330 41,510 44,210 46,920 49,640 52,290 63,270 83,230 87,160 542,060

124 Exclusion of certain foster care payments 480 500 520 530 540 550 560 570 570 580 580 5,500

125 Exclusion of parsonage allowances 839 850 896 943 993 1,046 1,101 1,160 1,221 1,285 1,353 10,848

126 Indian employment credit 20 20 10 10 10 10 10 10 10 10 10 110

127 Credit for employer differential wage payments 0 0 0 0 0 0 10 10 10 10 10 50

Health: 

128 205,080 203,290 214,950 227,350 239,620 253,230 268,240 284,210 333,840 370,750 391,420 2,786,900

129 Self-employed medical insurance premiums 7,420 7,430 7,910 8,440 8,970 9,450 10,010 10,590 12,520 13,870 14,600 103,790

130 Medical Savings Accounts / Health Savings Accounts 7,410 7,810 8,460 9,080 9,760 10,360 10,880 11,450 13,110 14,240 14,740 109,890

131 Deductibility of medical expenses 8,840 6,890 7,130 7,880 8,740 9,690 10,680 11,700 17,820 22,170 24,200 126,900

132 Exclusion of interest on hospital construction bonds 2,280 2,500 2,650 2,880 3,160 3,420 3,600 3,720 4,030 4,260 4,380 34,600

133 Refundable Premium Assistance Tax Credit 12/ 6,790 5,900 5,930 6,000 6,340 6,710 7,050 7,510 8,610 9,330 9,960 73,340

Ordinary income treatment of loss from small business corporation stock sale 

Exclusion of interest on bonds for Highway Projects and rail-truck transfer 

facilities

Exclusion of interest on savings bonds redeemed to finance educational 

expenses

Exclusion of employer contributions for medical insurance premiums and 

medical care 11/

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

31
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-28

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2018-2028

(in millions of dollars)

Total from individuals

134 Credit for employee health insurance expenses of small business 13/ 70 60 40 30 20 20 10 10 10 10 10 220

135 Deductibility of charitable contributions (health) 4,890 3,960 4,270 4,620 4,930 5,230 5,530 5,820 7,050 9,270 9,710 60,390

136 Tax credit for orphan drug research 30 30 40 50 60 70 80 100 110 130 150 820

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

138 20 10 0 0 0 0 0 0 0 0 0 10

139 430 420 430 450 460 470 490 500 590 630 650 5,090

Income security: 

140 Child credit 14/ 30,450 76,010 76,930 77,910 78,890 79,910 80,780 81,640 57,830 21,450 21,220 652,570

141 Exclusion of railroad retirement (Social Security equivalent) benefits 250 220 210 200 190 180 170 160 160 170 170 1,830

142 Exclusion of workers' compensation benefits 9,590 9,680 9,780 9,880 9,970 10,070 10,170 10,270 10,370 10,480 10,580 101,250

143 Exclusion of public assistance benefits (normal tax method) 580 580 600 620 640 660 670 700 720 740 690 6,620

144 Exclusion of special benefits for disabled coal miners 20 20 20 10 10 10 10 10 10 10 10 120

145 Exclusion of military disability pensions 160 160 160 170 170 180 180 180 210 220 220 1,850

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

146 Defined benefit employer plans 69,910 71,430 73,540 75,290 75,840 76,400 76,830 76,380 77,840 76,440 75,560 755,550

147 Defined contribution employer plans 72,260 75,720 84,590 90,670 97,200 104,080 111,230 118,850 142,180 155,000 164,490 1,144,010

148 Individual Retirement Accounts 19,680 20,620 23,590 24,730 26,510 28,150 29,930 32,000 37,340 40,760 44,170 307,800

149 Low and moderate income savers credit 1,180 1,170 1,180 1,180 1,200 1,190 1,200 1,210 1,330 1,320 1,320 12,300

150 Self-Employed plans 24,940 24,120 26,680 29,680 32,720 35,890 39,260 42,660 50,790 63,450 69,680 414,930

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

151 Premiums on group term life insurance 2,810 2,810 2,930 3,060 3,190 3,330 3,470 3,630 4,130 4,410 4,590 35,550

152 Premiums on accident and disability insurance 330 330 330 340 340 340 350 350 350 350 350 3,430

153 Income of trusts to finance supplementary unemployment benefits 30 30 40 40 50 50 50 50 60 60 60 490

154 Income of trusts to finance voluntary employee benefits associations 1,080 1,150 1,230 1,310 1,400 1,490 1,570 1,670 1,860 1,970 2,080 15,730

155 Special ESOP rules 120 120 130 130 140 140 150 150 160 160 170 1,450

156 Additional deduction for the blind 30 40 40 40 40 40 50 50 50 50 60 460

157 Additional deduction for the elderly 4,230 4,920 5,220 5,590 6,030 6,340 6,750 7,150 6,720 6,690 7,170 62,580

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

159 Deductibility of casualty losses 110 0 0 0 0 0 0 0 390 610 650 1,650

160 Earned income tax credit 16/ 8,050 8,110 2,660 2,710 2,780 2,850 2,940 3,020 3,100 10,520 10,770 49,460

Social Security: 

Exclusion of social security benefits: 

161 32,970 29,980 31,020 32,090 33,340 34,870 35,460 35,530 40,840 48,030 49,850 371,010

162 Credit for certain employer contributions to social security 570 600 630 670 700 740 770 810 850 890 940 7,600

Veterans benefits and services: 

163 Exclusion of veterans death benefits and disability compensation 8,240 8,180 8,710 9,060 9,400 9,750 10,100 10,480 11,340 12,860 13,340 103,220

164 Exclusion of veterans pensions 450 420 430 450 470 480 500 520 560 640 660 5,130

165 Exclusion of GI bill benefits 1,650 1,610 1,700 1,780 1,870 1,960 2,050 2,140 2,340 2,680 2,810 20,940

166 Exclusion of interest on veterans housing bonds 30 30 30 40 40 40 40 50 50 50 50 420

General purpose fiscal assistance: 

167 Exclusion of interest on public purpose State and local bonds 19,550 21,390 22,730 24,690 27,090 29,330 30,840 31,920 34,550 36,510 37,550 296,600

168 Build America Bonds 17/ 0 0 0 0 0 0 0 0 0 0 0 0

169 22,330 4,610 7,520 8,000 8,460 8,880 9,280 9,590 84,070 125,130 132,330 397,870

Interest: 

170 Deferral of interest on U.S. savings bonds 950 850 840 840 830 820 810 800 790 890 900 8,370

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 15,360 6,250 6,650 7,100 7,520 7,930 8,300 8,630 42,220 61,210 65,030 220,840

Nonbusiness State and local taxes other than on owner-occupied homes 

22,330 4,610 7,520 8,000 8,460 8,880 9,280 9,590 84,070 125,130 132,330 397,870

Exclusion of interest on State and local bonds for: 

Public purposes 19,550 21,390 22,730 24,690 27,090 29,330 30,840 31,920 34,550 36,510 37,550 296,600

Energy facilities 10 10 10 10 10 10 10 10 10 20 20 120

270 300 320 340 380 410 430 440 480 510 520 4,130

Small-issues 100 110 110 120 130 140 150 160 170 180 190 1,460

Owner-occupied mortgage subsidies 750 820 870 940 1,030 1,120 1,180 1,220 1,320 1,390 1,430 11,320

Rental housing 770 850 900 980 1,070 1,160 1,220 1,260 1,370 1,440 1,490 11,740

Airports, docks, and similar facilities 470 510 550 590 650 710 740 770 830 880 900 7,130

Student loans 200 220 240 260 280 310 320 330 360 380 390 3,090

Private nonprofit educational facilities 1,550 1,690 1,800 1,950 2,140 2,320 2,440 2,530 2,740 2,890 2,970 23,470

Hospital construction 2,280 2,500 2,650 2,880 3,160 3,420 3,600 3,720 4,030 4,260 4,380 34,600

Veterans' housing 30 30 30 40 40 40 40 50 50 50 50 420

See Table 1 footnotes for specific table information

Water, sewage, and hazardous waste disposal facilities 

Social Security benefits for retired and disabled workers and spouses, 

dependents and survivors

Deductibility of nonbusiness State and local taxes other than on owneroccupied homes 6/

Tax credit for health insurance purchased by certain displaced and retired 

individuals 14/

Distributions from retirement plans for premiums for health and long-term care 

insurance

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

32
(in millions of dollars)

Provision 2019 2020 2019-28

130 Exclusion of employer contributions for medical insurance premiums and medical care 11/ 203,290 214,950 2,786,900

64 Exclusion of net imputed rental income 121,070 125,610 1,536,040

72 Capital gains (except agriculture, timber, iron ore, and coal) 102,910 99,210 1,152,610

149 Defined contribution employer plans 75,720 84,590 1,144,010

148 Defined benefit employer plans 71,430 73,540 755,550

142 Child credit 15/ 76,010 76,930 652,570

74 Step-up basis of capital gains at death 49,920 51,840 622,190

60 Deductibility of mortgage interest on owner-occupied homes 26,850 29,820 597,610

63 Capital gains exclusion on home sales 44,380 46,600 577,330

125 Deductibility of charitable contributions, other than education and health 36,660 39,540 555,930

85 Allow 20-percent deduction to certain pass-through income 53,273 57,429 480,108

5 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 34,490 38,950 419,060

152 Self-Employed plans 24,120 26,680 414,930

171 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 6/ 4,610 7,520 397,870

71 Treatment of qualified dividends 28,730 29,820 384,120

163 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 29,980 31,020 371,010

169 Exclusion of interest on public purpose State and local bonds 24,080 25,100 316,730

150 Individual Retirement Accounts 20,620 23,590 307,800

79 Accelerated depreciation of machinery and equipment (normal tax method) 68,750 65,410 285,420

61 Deductibility of State and local property tax on owner-occupied homes 6/ 6,250 6,650 220,840

9 Credit for increasing research activities 14,480 15,870 208,560

53 Exclusion of life insurance death benefits 14,350 15,550 192,010

103 Tax credits and deductions for postsecondary education expenses 8/ 16,300 16,360 166,270

1 Exclusion of benefits and allowances to armed forces personnel 12,450 11,220 127,040

133 Deductibility of medical expenses 6,890 7,130 126,900

132 Medical Savings Accounts / Health Savings Accounts 7,810 8,460 109,890

131 Self-employed medical insurance premiums 7,430 7,910 103,790

165 Exclusion of veterans death benefits and disability compensation 8,180 8,710 103,220

144 Exclusion of workers' compensation benefits 9,680 9,780 101,250

66 Credit for low-income housing investments 9,040 9,070 98,500

6 Deduction for foreign-derived intangible income dervied from trade or business within the United States 7,420 7,970 95,180

2 Exclusion of income earned abroad by U.S. citizens 7,280 7,640 91,520

65 Exception from passive loss rules for $25,000 of rental loss 6,030 6,390 78,840

135 Refundable Premium Assistance Tax Credit 12/ 5,900 5,930 73,340

80 Expensing of certain small investments (normal tax method) 1,660 2,290 62,880

67 Accelerated depreciation on rental housing (normal tax method) 2,810 3,410 62,710

159 Additional deduction for the elderly 4,920 5,220 62,580

112 Deductibility of charitable contributions (education) 4,140 4,450 61,610

137 Deductibility of charitable contributions (health) 3,960 4,270 60,390

122 Exclusion of employee meals and lodging (other than military) 4,260 4,390 53,710

123 Credit for child and dependent care expenses 4,360 4,460 49,500

162 Earned income tax credit 16/ 8,110 2,660 49,460

138 Tax credit for orphan drug research 1,550 1,880 43,090

106 Qualified tuition programs 2,200 2,420 39,440

134 Exclusion of interest on hospital construction bonds 2,810 2,930 36,950

102 Exclusion of scholarship and fellowship income (normal tax method) 2,840 2,960 36,580

77 Deferral of gains from like-kind exchanges 2,850 2,980 35,750

153 Premiums on group term life insurance 2,810 2,930 35,550

16 Energy production credit 1/ 3,240 3,320 32,980

18 Energy investment credit 1/ 4,300 5,100 30,310

75 Carryover basis of capital gains on gifts 3,040 3,030 29,350

88 Exclusion of reimbursed employee parking expenses 2,201 2,271 25,337

108 Exclusion of interest on bonds for private nonprofit educational facilities 1,900 1,990 25,060

52 Exemption of credit union income 1,861 2,010 24,017

111 Parental personal exemption for students age 19 or over 0 0 23,550

157 Special ESOP rules 2,070 2,130 23,410

105 Deductibility of student-loan interest 1,980 2,030 22,320

167 Exclusion of GI bill benefits 1,610 1,700 20,940

62 Deferral of income from installment sales 1,720 1,750 19,980

73 Capital gains exclusion of small corporation stock 1,240 1,410 17,590

7 Interest Charge Domestic International Sales Corporations (IC-DISCs) 1,280 1,340 16,100

156 Income of trusts to finance voluntary employee benefits associations 1,150 1,230 15,730

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

FISCAL YEAR 2019-2028 PROJECTED REVENUE EFFECT

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

33
(in millions of dollars)

Provision 2019 2020 2019-28

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

FISCAL YEAR 2019-2028 PROJECTED REVENUE EFFECT

48 Capital gains treatment of certain agriculture income 1,380 1,330 15,450

164 Credit for certain employer contributions to social security 1,140 1,200 14,420

57 Exclusion of interest spread of financial institutions 2,250 1,170 14,240

59 Exclusion of interest on rental housing bonds 960 990 12,540

151 Low and moderate income savers credit 1,170 1,180 12,300

58 Exclusion of interest on owner-occupied mortgage subsidy bonds 920 960 12,080

113 Exclusion of employer-provided educational assistance 890 940 11,900

127 Exclusion of parsonage allowances 850 896 10,848

118 Employer provided child care exclusion 680 720 9,490

120 Assistance for adopted foster children 630 680 9,300

10 Expensing of exploration and development costs, fuels 850 820 8,800

172 Deferral of interest on U.S. savings bonds 850 840 8,370

121 Adoption credit and exclusion 630 700 7,640

93 Exclusion of interest for airport, dock, and similar bonds 570 610 7,600

15 Enhanced oil recovery credit 520 570 7,280

145 Exclusion of public assistance benefits (normal tax method) 580 600 6,620

11 Excess of percentage over cost depletion, fuels 290 410 6,420

96 New markets tax credit 1,320 1,280 6,350

22 Exclusion of utility conservation subsidies 450 470 5,570

126 Exclusion of certain foster care payments 500 520 5,500

166 Exclusion of veterans pensions 420 430 5,130

141 Distributions from retirement plans for premiums for health and long-term care insurance 420 430 5,090

116 Qualified school construction bonds 10/ 600 570 4,790

89 Exclusion for employer-provided transit passes 363 383 4,707

42 Tax incentives for preservation of historic structures 140 240 4,520

39 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 340 350 4,410

117 Work opportunity tax credit 1,520 1,100 4,260

139 Special Blue Cross/Blue Shield tax benefits 290 310 4,010

32 Credit for residential energy efficient property 1,530 1,180 3,700

55 Tax exemption of insurance income earned by tax-exempt organizations 320 330 3,680

43 Carbon oxide sequestration credit 110 70 3,430

154 Premiums on accident and disability insurance 330 330 3,430

46 Expensing of certain multiperiod production costs 250 270 3,420

107 Exclusion of interest on student-loan bonds 250 260 3,290

21 Tax credits for clean-fuel burning vehicles and refueling property 640 450 3,240

3 Exclusion of certain allowances for Federal employees abroad 250 260 3,140

38 Excess of percentage over cost depletion, nonfuel minerals 250 250 2,780

100 Opportunity Zones 1,980 2,510 2,640

41 Expensing of multiperiod timber growing costs 200 210 2,580

28 Amortize all geological and geophysical expenditures over 2 years 180 180 2,410

114 Special deduction for teacher expenses 180 180 2,220

45 Expensing of certain capital outlays 150 160 2,060

25 Credit for investment in clean coal facilities 60 30 1,970

147 Exclusion of military disability pensions 160 160 1,850

143 Exclusion of railroad retirement (Social Security equivalent) benefits 220 210 1,830

35 Advanced nuclear power production credit 80 200 1,740

17 Marginal wells credit 0 70 1,690

161 Deductibility of casualty losses 0 0 1,650

97 Credit to holders of Gulf Tax Credit Bonds. 170 170 1,590

82 Exclusion of interest on small issue bonds 120 120 1,560

49 Income averaging for farmers 110 110 1,550

13 Capital gains treatment of royalties on coal 140 130 1,540

40 Capital gains treatment of certain timber income 140 130 1,540

91 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 170 170 1,430

36 Reduced tax rate for nuclear decommissioning funds 100 100 1,210

86 Tonnage tax 90 90 1,070

94 Exemption of certain mutuals' and cooperatives' income 90 90 1,020

115 Discharge of student loan indebtedness 90 90 1,020

109 Credit for holders of zone academy bonds 9/ 170 150 930

98 Recovery Zone Bonds 7/ 90 90 860

51 Expensing of reforestation expenditures 50 60 780

76 Ordinary income treatment of loss from small business corporation stock sale 70 70 760

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

34
(in millions of dollars)

Provision 2019 2020 2019-28

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

FISCAL YEAR 2019-2028 PROJECTED REVENUE EFFECT

70 Exceptions from imputed interest rules 60 60 740

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

54 Exemption or special alternative tax for small property and casualty insurance companies 40 40 490

155 Income of trusts to finance supplementary unemployment benefits 30 40 490

101 Employee retention credit 200 60 480

47 Treatment of loans forgiven for solvent farmers 30 30 460

158 Additional deduction for the blind 40 40 460

168 Exclusion of interest on veterans housing bonds 30 30 420

110 Exclusion of interest on savings bonds redeemed to finance educational expenses 30 30 410

37 Expensing of exploration and development costs, nonfuel minerals 20 30 400

44 Deduction for endangered species recovery expenditures 30 30 390

69 Discharge of business indebtedness 10 50 360

104 Education Individual Retirement Accounts 40 40 360

33 Qualified energy conservation bonds 5/ 30 30 300

136 Credit for employee health insurance expenses of small business 13/ 70 50 250

119 Employer-provided child care credit 20 20 200

50 Deferral of gain on sale of farm refiners 15 15 175

34 Advanced Energy Property Credit 10 10 170

128 Indian employment credit 30 20 160

90 Tax credit for certain expenditures for maintaining railroad tracks 40 40 150

95 Empowerment zones 50 40 140

14 Exclusion of interest on energy facility bonds 10 10 120

87 Deferral of tax on shipping companies 12 12 120

129 Credit for employer differential wage payments 0 0 120

146 Exclusion of special benefits for disabled coal miners 20 20 120

99 Tribal Economic Development Bonds 10 10 100

124 Credit for disabled access expenditures 10 10 100

12 Exception from passive loss limitation for working interests in oil and gas properties 0 0 70

30 Credit for construction of new energy efficient homes 50 10 60

29 Allowance of deduction for certain energy efficient commercial building property 10 0 10

92 Investment credit for rehabilitation of structures (other than historic) 10 0 10

140 Tax credit for health insurance purchased by certain displaced and retired individuals 14/ 10 0 10

4 Inventory property sales source rules exception 0 0 0

19 Alcohol fuel credits 2/ 0 0 0

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

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

56 Small life insurance company deduction 0 0 0

68 Discharge of mortgage indebtedness 0 0 0

81 Graduated corporation income tax rate (normal tax method) 0 0 0

83 Deduction for US production activities 0 0 0

160 Tax credit for the elderly and disabled 0 0 0

170 Build America Bonds 17/ 0 0 0

27 Natural gas distribution pipelines treated as 15-year property 70 70 -320

24 Deferral of gain from dispositions of transmission property to implement FERC restructuring policy -120 -100 -410

84 Special rules for certain film and TV production -250 -240 -1,330

26 Temporary 50% expensing for equipment used in the refining of liquid fuels -460 -370 -1,410

78 Depreciation of buildings other than rental housing (normal tax method) -7,600 -8,110 -102,520

8 Expensing of research and experimentation expenditures (normal tax method) 6,750 7,430 -110,850

See Table 1 footnotes for specific table information

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

35
2018

Provision Present Value

of Revenue Loss

8 Expensing of research and experimentation expenditures (normal tax method) 3,890

23 Credit for holding clean renewable energy bonds 0

10 Expensing of exploration and development costs - fuels 176

37 Expensing of exploration and development costs - nonfuels 18

41 Expensing of multiperiod timber growing costs 150

46 Expensing of certain multiperiod production costs - agriculture -10

45 Expensing of certain capital outlays - agriculture 0

51 Expensing of reforestation expenditures 30

67 Accelerated depreciation on rental housing 6,500

78 Depreciation of buildings other than rental -10,050

79 Accelerated depreciation of machinery and equipment -9,850

78 Expensing of certain small investments (normal tax method) 120

109 Credit for holders of zone academy bonds 160

66 Credit for low-income housing investments 8,900

106 Qualified tuition programs 4,360

148 Defined benefit employer plans 41,892

149 Defined contribution employer plans 88,830

150 Exclusion of IRA contributions and earnings 1,780

150 Exclusion of Roth earnings and distributions 4,770

150 Exclusion of non-deductible IRA earnings 570

152 Exclusion of contributions and earnings for Self-Employed plans 5,620

169 Exclusion of interest on public-purpose bonds 14,870

Exclusion of interest on non-public purpose bonds 3,840

172 Deferral of interest on U.S. savings bonds 240

Table 4. PRESENT VALUE OF SELECTED TAX EXPENDITURES

FOR ACTIVITY IN CALENDAR YEAR 2018

(in millions of dollars)

U.S. Department of the Treasury 

Office of Tax Analysis 

October 19, 2018

36