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 Office of Tax Analysis

 June 3, 2021

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 2020–2030 using two 

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

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

TAX EXPENDITURES IN THE INCOME TAX

Tax Expenditure Estimates

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

2020, and reflect the economic assumptions from the 2022 Budget. In some cases, expired or repealed provisions are listed if 

their tax receipt effects occur in fiscal year 2020 or later. 

The total receipt effects for tax expenditures for fiscal years 2020–2030 are displayed according to the Budget’s functional 

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

expenditure concept.

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

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

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

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

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

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

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

Table 3 ranks the major tax expenditures by the size of their 2021–2030 receipt effect. The first column provides the number 

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

Interpreting Tax Expenditure Estimates

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

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

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

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

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

the estimates.

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

latter the post-1982 method.
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Second, tax expenditures are interdependent even without incentive effects. Repeal of a tax expenditure provision can 

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

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

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

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

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

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

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

Table 1 should be regarded as approximations.

Present-Value Estimates

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

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

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

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

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

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

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

tables.

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

during calendar year 2020 which cause the deferrals or other long-term receipt effects. For instance, a pension contribution in 

2020 would cause a deferral of tax payments on wages in 2020 and on pension fund earnings on this contribution (e.g., interest) 

in later years. In some future year, however, the 2020 pension contribution and accrued earnings will be paid out and taxes will 

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

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

Tax Expenditure Baselines

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

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

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

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

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

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

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

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

or by a specific definition of the taxpaying unit.

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

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

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

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

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

For example, under the normal tax and reference tax law baselines:

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

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

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

part of the rate structure.

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

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

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

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

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

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

law and normal tax baselines.3

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

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

Descriptions of Income Tax Provisions

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

relate to current law as of December 31,2020. Legislation enacted in 2020 expanded the scope and size of tax expenditures. The 

Families First Coronavirus Response Act created a tax credit for qualified sick leave and family leave equivalent amounts for 

self-employed individuals. The Coronavirus Aid, Relief, and Economic Security (CARES) Act introduced a recovery rebate tax 

credit for eligible individuals and an exclusion for certain loans received under the “Paycheck Protection Program” and subsequently forgiven. CARES also modified a number of tax expenditures. It created an exception to the 10-percent early withdrawal tax for “coronavirus related distributions” from a qualified retirement plan or IRA, and another exception to the required minimum distribution rules. It introduced a partial above-the-line deduction for charitable deductions, and expanded the 

limits on deductions for charitable contributions. It also included over-the-counter medicines and drugs and menstrual care 

products as qualified medical expenses for HSAs, Archer MSAs, health FSAs, and HRAs. It also modified a number of other 

provisions in the tax Code. The Consolidated Appropriations Act (CAA) created another rebate and adjusted several provisions

in CARES. 

National Defense

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

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

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

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

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

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

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

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

limited under the Alternative Minimum Tax.
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International Affairs

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

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

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

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

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

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

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

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

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

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

abroad or whether it is labeled as an allowance for the high cost of living abroad. In contrast to this treatment, U.S. Federal civilian employees and Peace Corps members who work outside the continental United States are allowed to exclude from U.S. 

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

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

from the United States.

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

worldwide income forms the tax base of U.S. corporations. In contrast, U.S. tax law exempts or preferentially taxes certain portions of this income. Prior to the passage of the Tax Cuts and Jobs Act TCJA (effective January 1, 2018), active foreign income 

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

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

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

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

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

shareholders of specified foreign corporations must include their pro rata share of accumulated post-1986 deferred foreign income (as of the last taxable year before January 1, 2018) in U.S. taxable income, and this inclusion acts as an offset to the reduced tax rate on CFC income in the years in which the payments are received.

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

tax system, the United States taxes income earned by U.S. corporations from serving foreign markets (e.g., exports and royalties) at the full U.S. rate. After the passage of TCJA, domestic corporations are allowed a deduction equal to 37.5 percent of 

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

The deduction falls to 21.875 percent in 2026.

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

are subject to tax using the regular tax rates applied to all taxpayers. In contrast, IC-DISCs allow a portion of income from exports to be taxed at the qualified dividend rate which is no higher than 20 percent (plus a 3.8 percent surtax for high-income 

taxpayers).

General Science, Space, and Technology

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

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

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

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

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

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

after December 31, 2021, to be capitalized and amortized over 5 years, while allowing R&E expenditures paid or incurred in 

prior taxable years to be expensed.

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

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

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

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

Energy

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

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

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

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

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

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

Non-integrated oil companies may expense all such costs.

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

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

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

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

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

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

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

though there are numerous additional considerations brought to bear on the determination of which activities are passive for a 

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

forward and applied against future passive income. An exception from the passive loss limitation is provided for a working interest in an oil or gas property that the taxpayer holds directly or through an entity that does not limit the liability of the taxpayer with respect to the interest. Thus, taxpayers can deduct losses from such working interests against nonpassive income without regard to whether they materially participate in the activity.

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

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

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

taxed at a preferentially low rate that is no higher than 20 percent (plus the 3.8 percent surtax). Certain sales of coal under royalty contracts qualify for taxation as capital gains rather than ordinary income, and so benefit from the preferentially low 20 percent maximum tax rate on capital gains. 

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

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

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

14. Enhanced oil recovery credit.—A credit is provided equal to 15 percent of the taxpayer’s costs for enhanced oil recovery 

on U.S. projects. The credit is reduced in proportion to the ratio of the reference price of oil for the previous calendar year minus $28 (adjusted for inflation from 1990) to $6.

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

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

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

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

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

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

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

2021.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

fully taxable.

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

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

24. Amortize all geological and geophysical expenditures over two years.—The baseline tax system allows taxpayers to deduct 

the decline in the economic value of an investment over its economic life. However, the Tax Code allows geological and geophysical expenditures incurred in connection with oil and gas exploration in the United States to be amortized over two years 

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

25. Allowance of deduction for certain energy efficient commercial building property.—The baseline tax system would not allow deductions in lieu of normal depreciation allowances for particular investments in particular industries. Instead, it generally 

would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code allows a deduction for certain 

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

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

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

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

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

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

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

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

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

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

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

28. Credit for residential energy efficient property.—The baseline tax system would uniformly tax all returns to investments 

and not allow credits for particular activities, investments, or industries. However, the Tax Code provides a credit for the purchase of a qualified photovoltaic property and solar water heating property, as well as for fuel cell power plants, geothermal 

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

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

2023. 

29. Credit for qualified energy conservation bonds.—The baseline tax system would uniformly tax all returns to investments 

and not allow credits for particular activities, investments, or industries. However, the Tax Code provides for the issuance of 

energy conservation bonds which entitle the bond holder to a Federal income tax credit in lieu of interest. As of March 2010, 

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

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

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

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

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

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

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

Natural Resources and Environment

33. Expensing of exploration and development costs, nonfuel minerals.—The baseline tax system allows the taxpayer to deduct the depreciation of an asset according to the decline in its economic value over time. However, certain capital outlays associated with exploration and development of nonfuel minerals may be expensed rather than depreciated over the life of the 

asset.

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

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

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

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

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

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

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

types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance construction of sewage, water, or hazardous waste facilities to be exempt from tax. These bonds are generally subject to the State private-activity bond annual volume cap.

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

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

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

capital-gains tax rate. For individuals, tax rates on regular income vary from 10 percent to 39.6 percent in the budget window
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(plus a 3.8 percent surtax on high income taxpayers), depending on the taxpayer’s income. In contrast, current law allows capital gains to be taxed at a preferentially low rate that is no higher than 20 percent (plus the 3.8 percent surtax). 

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

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

38. Tax incentives for preservation of historic structures.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, expenditures to preserve and restore certified historic structures qualify for an investment tax credit of 20 percent for certified rehabilitation activities. The taxpayer’s recoverable basis must be reduced by the 

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

placed in service after December 31, 2017.

39. Carbon oxide sequestration credit.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code allows a credit for qualified carbon 

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

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

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

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

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

gross income for expenses incurred as a result of site and habitat improvement activities that will benefit endangered species on 

their farm land, in accordance with site specific management actions included in species recovery plans approved pursuant to 

the Endangered Species Act of 1973.

Agriculture

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

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

measures, and certain other capital improvements under current law.

42. Expensing of certain multiperiod production costs.—The baseline tax system requires the taxpayer to capitalize costs associated with an investment over time. However, the production of livestock and crops with a production period greater than 

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

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

system requires debtors to include the amount of loan forgiveness as income or else reduce their recoverable basis in the property related to the loan. If the amount of forgiveness exceeds the basis, the excess forgiveness is taxable if the taxpayer is not insolvent. For bankrupt debtors, the amount of loan forgiveness reduces carryover losses, unused credits, and then basis, with the 

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

even when the taxpayer is solvent.

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

income. 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. 

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

three years.

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

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

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

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

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

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

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

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

49. Exclusion of life insurance death benefits.—Under the baseline tax system, individuals and corporations would pay taxes on their income when it is (actually or constructively) received or accrued. Nevertheless, current law generally excludes from 

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

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

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

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

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

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

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

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

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

for 2021, the premium limit is $2.4 million.

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

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

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

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

tax.

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

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

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

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

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

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

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

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

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

contrast, the Tax Code allows interest earned on State and local government bonds used to finance multifamily rental housing 

projects to be tax-exempt.

55. Mortgage interest expense on owner-occupied residences.—Under the baseline tax system, expenses incurred in earning 

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

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

56. Deductibility of State and local property tax on owner-occupied homes.—Under the baseline tax system, expenses in-
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curred 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).

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

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

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

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

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

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

is, therefore, a tax expenditure.

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

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

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

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

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

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

income, such as for mortgage interest and property taxes.

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

limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., wages, interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate, and there are numerous additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. 

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

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

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

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

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

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

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

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

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

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

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

63. Discharge of 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.

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

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

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

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

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

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

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

66. 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 in the budget window (plus a 3.8 percent surtax on high income taxpayers), depending on the taxpayer’s income. In contrast, under current law, 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). 

67. 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. 

68. 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.

69. 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.

70. 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.

71. 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.

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

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

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

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

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

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

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

the property’s economic value due to wear and tear or obsolescence. This insures that the net income from the property is 

measured appropriately each year. Current law allows depreciation deductions that are accelerated relative to economic depreciation. In particular, through 2022, 100 percent of the purchase cost of qualified property is eligible to be expensed immediately; this percentage phases out to zero through 2027. The depreciation provisions of the Tax Code are part of the reference tax

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

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

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

computer software to be expensed rather than depreciated over time.

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

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

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

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

the end of 2025.

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

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

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

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

Transportation

78. 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.

79. 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). 

80. Exclusion of reimbursed employee parking expenses.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent 

accretions to wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from taxable 

income for employee parking expenses that are paid for by the employer or that are received by the employee in lieu of wages. 

In 2021, the maximum amount of the parking exclusion is $270 per month. The tax expenditure estimate does not include any 

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

81. Exclusion for employer-provided transit passes.—Under the baseline tax system, all compensation, including dedicated 

payments and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent accretions to wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from a taxpayer’s 

taxable income for passes, tokens, fare cards, and vanpool expenses that are paid for by an employer or that are received by the 

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

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

82. 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.

83. Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities.—The baseline tax system generally 

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

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

qualified highway or surface freight transfer facilities. 

Community and Regional Development

84. Investment credit for rehabilitation of structures (other than historic).—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 rehabilitation expenditures incurred after December 31, 2017.

85. 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 
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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.

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

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

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

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

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

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

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

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

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

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

89. 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.

90. 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.

91. 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.

92. 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. 

93. Disaster Employee Retention Credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides employers located in certain presidentially declared disaster areas during the years 2017 through 2020 a 40 percent credit for up to $6,000 in wages paid to each eligible employee while the business 

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

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

claimed.

Education, Training, Employment, and Social Services

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

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

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

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

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

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

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

scholarships are derived directly or indirectly from Government funding.)

95. Tax credits for post-secondary education expenses.—The baseline tax system would not allow credits for particular activities, investments, or industries. Under current law in 2020, however, there are two credits for certain post-secondary education 

expenses. The American Opportunity Tax Credit allows a partially refundable credit of up to $2,500 per eligible student for 
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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 Tax Year 2020, the credit 

is phased out ratably for taxpayers with modified AGI between $118,000 and $138,000 if married filing jointly ($59,000 and 

$69,000 for other taxpayers). Beginning with Tax Year 2021, the phaseout ranges for the Lifetime Learning credit are raised to 

conform to the ranges for the American Opportunity Tax Credit and indexing is eliminated. 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. Married individuals filing separate returns cannot claim either credit. For tax years ending before December 31, 2020,

certain taxpayers could choose to claim an above the line deduction for qualified tuition and related expenses rather than either 

of the two credits.

96. 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 Tax Year 2020, the maximum deduction is phased down ratably for taxpayers with 

modified AGI between $140,000 and $170,000 if married filing jointly ($70,000 and $85,000 for other taxpayers). Married individuals filing separate returns cannot claim the deduction.

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

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

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

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

98. 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.

99. 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.

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

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

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

101. 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 $123,550 and $153,550 if married filing jointly ($82,350 and $97,350 for 

other taxpayers) in 2020.

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

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

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

2026. However, the definitions regarding eligibility for dependent exemptions for children (and qualifying relatives), which determine eligibility for a number of family-related provisions, remain in place. These provisions include the new $500 credit for 

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

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

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

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

103. 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 
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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.

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

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

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

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

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

payments are considered eligible educational assistance.

105. 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).

106. 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.

107. 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.

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

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

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

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

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

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

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

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

109. 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, in Taxable Year 2020 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.

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

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

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

111. 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.

112. 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. 

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

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

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

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

meals provided to employees. Employer-provided lodging is fully deductible by the employer, in general.
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114. Credit for child and dependent care expenses.—The baseline tax system would not allow credits for particular activities 

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

have child and dependent care expenses. In taxable year 2020 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.

115. 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. 

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

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

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

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

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

117. 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.

118. 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.

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

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

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

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

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

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

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

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

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

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

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

Health

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

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

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

employee.

122. 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.

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

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

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

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

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

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

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

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

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

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

125. 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.

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

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

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

a taxpayer with annual household income between 100 percent and 400 percent of the federal poverty level for a family of the taxpayer’s size and that does not have access to affordable minimum essential health care coverage. The amount of the credit equals the lesser of (1) the actual premiums paid by the taxpayer for such coverage or (2) the difference between the cost of a statutorily-identified 

benchmark plan offered on the exchange and a required payment by the taxpayer that increases with income. The American Rescue 

Plan Act of 2021 (P.L. 117-2) temporarily increased the Premium Tax Credit in three ways. For 2021 and 2022, the legislation increased the Premium Tax Credit for currently eligible individuals and families, providing access to free plans for those earning 100 to 

150 percent of the federal poverty level, and expanded eligibility to newly include individuals and families with income above 400 

percent of the federal poverty level. The legislation also expanded eligibility in 2021 to individuals who receive unemployment insurance for any week in 2021. The legislation also eliminated the requirement for individuals to repay any excess advance payments of 

the Premium Tax Credit for 2020.

127. 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.

128. 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.

129. Tax credit for orphan drug research.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, under current law drug firms can claim a tax credit of 50 percent of the costs for clinical testing 

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

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

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

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

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

than 85 percent for the taxable year. A qualifying insurer may take as a deduction 100 percent of any net increase in its unearned premium reserves, instead of the 80 percent allowed other insurers. A qualifying insurer is also allowed a special deduction equal to the amount by which 25 percent of its health-claim expenses exceeds its beginning-of-the-year accounting surplus. 
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The deduction is limited to the insurer’s taxable income determined without the special deduction.

131. 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.

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

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

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

care premiums of public safety officers.

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

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

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

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

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

2021.

Income Security

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

Under current law, however, taxpayers with children under age 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 a Social Security Number (SSN). A taxpayer may also claim a nonrefundable credit of $500 for each qualifying child not eligible for the $2,000 credit (those over sixteen and those without SSNs) 

and for each dependent relative. The total combined child and other dependent credit is phased out for taxpayers at the rate of 

$50 per $1,000 of modified AGI above $400,000 ($200,000 for single or head of household filers and $200,000 for married taxpayers filing separately). For tax years beginning after December 31, 2025, the credit returns to its pre-TCJA value of $1,000. At 

that time, up to the full value of the credit (subject to a phase-in of 15 percent of earnings in excess of $3,000) will be refundable 

and the $500 other dependent credit will expire. The credit will once again phase out at the rate of $50 per $1,000 of modified 

AGI above $110,000 ($75,000 for single or head of household filers and $55,000 for married taxpayers filing separately). The 

social security requirement will remain in place.

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

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

to railroad retirees is not generally subject to the income tax unless the recipient’s gross income reaches a certain threshold under current law. See provision number 156, Social Security benefits for retired workers, for discussion of the threshold.

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

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

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

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

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

138. Exclusion of special benefits for disabled coal miners.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. However, disability payments to former coal miners 

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

139. Exclusion of military disability pensions.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, most of the military disability pension income 

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

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

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

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

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

plans is deferred until the money is withdrawn.

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

under current law individual taxpayers and employers can make tax-preferred contributions to employer-provided 401(k) and 
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similar plans (e.g. 403(b) plans and the Federal Government’s Thrift Savings Plan). In 2020, an employee could exclude up to 

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

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

by these plans is deferred until withdrawn.

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

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

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

make additional “catch-up’’ contributions of $1,000. Contributions to a traditional IRA are generally deductible but the deduction is phased out for workers with incomes above certain levels if the workers or their spouses are active participants in an employer-provided retirement plan. Contributions and account earnings are includible in income when withdrawn from traditional 

IRAs. Roth IRA contributions are not deductible, but earnings and withdrawals are exempt from taxation. Income limits also 

apply to Roth IRA contributions.

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

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

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

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

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

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

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

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

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

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

145. Premiums on group term life insurance.—Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In contrast, under current law employer-provided life insurance benefits 

are excluded from an employee’s gross income (to the extent that the employer’s share of the total costs does not exceed the 

cost of $50,000 of such insurance) even though the employer’s costs for the insurance are a deductible business expense.

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

payments and in-kind benefits, should be included in taxable income. In contrast, under current law employer-provided accident and disability benefits are excluded from an employee’s gross income even though the employer’s costs for the benefits are 

a deductible business expense.

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

compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In addition, investment income would be taxed as earned. Under current law, employers may establish trusts to pay supplemental unemployment 

benefits to employees separated from employment. Investment income earned by such trusts is exempt from taxation.

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

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

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

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

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

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

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

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

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

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

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

standard deduction for a targeted group within a given filing status would not be allowed. In contrast, the Tax Code allows taxpayers who are blind to claim an additional $1,700 standard deduction if single, or $1,350 if married in 2019.

151. Additional deduction for the elderly.—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 65 years or older to claim an additional $1,700 standard deduction if single, or $1,350 if married in 2020.

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

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

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

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

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

area.

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

at specific groups. In contrast, the Tax Code provides an EITC to low-income workers at a maximum rate of 45 percent of income. In 2020, for a family with one qualifying child, the credit is 34 percent of the first $10,540 of earned income. The credit is 

40 percent of the first $14,800 of income for a family with two qualifying children, and it is 45 percent of the first $14,800 of 

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

7.65 percent credit on the first $7,030 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 2020, 

the phase-down for married filers begins at incomes $5,890 ($5,800 for filers without children) greater than for otherwise similar 

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

smaller inflation adjustment than previously. This change is permanent.

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

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

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

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

Social Security

155. 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 136, Exclusion of railroad Social Security equivalent benefits.

156. 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

157. Exclusion of veterans death benefits and disability compensation.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to 

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

158. Exclusion of veterans pensions.—Under the baseline tax system, all compensation, including dedicated payments and 
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

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.

159. 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.

160. 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

161. 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.

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

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

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

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

163. 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 57.) 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

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

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

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

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

National Defense

1 Exclusion of benefits and allowances to armed 

forces personnel 

12,910 13,940 14,460 15,010 13,770 13,890 14,380 14,990 15,660 16,390 17,160 149,650

International affairs: 

2 Exclusion of income earned abroad by U.S. 

citizens 

6,160 6,470 6,790 7,130 7,490 7,860 8,260 8,670 9,100 9,560 10,040 81,370

3 Exclusion of certain allowances for Federal 

employees abroad

270 280 290 310 320 340 360 370 390 410 430 3,500

4 Reduced tax rate on active income of controlled 

foreign corporations (normal tax method)

27,570 29,780 32,240 33,980 35,730 37,550 29,390 30,580 30,890 31,370 32,040 323,560

5 Deduction for foreign-derived intangible income 

dervied from trade or business within the United 

States

9,450 10,200 11,050 11,650 12,250 12,870 7,620 7,930 8,010 8,140 8,310 98,030

6 Interest Charge Domestic International Sales 

Corporations (IC-DISCs) 

890 1,370 1,440 1,510 1,590 1,690 2,010 2,280 2,410 2,520 2,600 19,420

General science, space, and technology: 

7 Expensing of research and experimentation 

expenditures (normal tax method) 

5,420 3,980 -17,100 -29,140 -22,200 -13,600 -4,180 0 0 0 0 -82,240

8 Credit for increasing research activities 16,940 18,300 19,910 21,360 22,720 24,060 25,420 26,790 28,170 29,600 31,070 247,400

Energy: 

9 Expensing of exploration and development costs, 

fuels 

40 -40 90 230 380 430 460 480 490 500 490 3,510

10 Excess of percentage over cost depletion, fuels 590 600 720 790 830 870 950 1,020 1,090 1,150 1,210 9,230

11 Exception from passive loss limitation for working 

interests in oil and gas properties 

20 20 10 20 20 20 20 20 20 20 20 190

12 Capital gains treatment of royalties on coal 100 70 50 50 50 50 60 60 60 70 70 590

13 Exclusion of interest on energy facility bonds 0 10 10 10 10 10 10 10 10 10 10 100

14 Enhanced oil recovery credit 470 500 560 660 880 1,080 1,190 1,250 1,310 1,360 1,400 10,190

15 Energy production credit 1/ 5,020 5,280 5,180 5,420 5,770 6,010 5,740 5,570 5,260 4,870 4,280 53,380

16 Marginal wells credit 150 250 310 280 210 140 90 40 20 0 0 1,340

17 Energy investment credit 1/ 6,070 6,330 7,050 6,780 7,380 7,540 6,970 6,880 5,520 4,450 3,180 62,080

18 Alcohol fuel credits 2/ 0 10 0 0 0 0 0 0 0 0 0 10

19 Bio-Diesel and small agri-biodiesel producer tax 

credits 3/

30 40 40 20 0 0 0 0 0 0 0 100

20 Tax credits for clean-fuel burning vehicles and 

refueling property

570 440 480 440 380 360 330 270 240 230 230 3,400

21 Exclusion of utility conservation subsidies 60 60 50 50 50 40 40 40 30 30 30 420

22

Credit for holding clean renewable energy bonds 4/

70 70 70 70 70 70 70 70 70 70 70 700

23 Credit for investment in clean coal facilities 30 30 20 10 30 30 30 30 40 30 30 280

24 Amortize all geological and geophysical 

expenditures over 2 years

80 80 90 100 110 110 110 110 110 100 100 1,020

25 Allowance of deduction for certain energy efficient 

commercial building property

160 190 130 110 110 110 110 110 110 110 110 1,200

26 Credit for construction of new energy efficient 

homes

320 370 280 260 250 260 270 170 60 20 0 1,940

27 Credit for energy efficiency improvements to 

existing homes

240 240 120 0 0 0 0 0 0 0 0 360

28 Credit for residential energy efficient property 2,370 2,390 1,980 1,450 420 120 0 0 0 0 0 6,360

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

30 Advanced Energy Property Credit 10 10 10 10 10 10 10 10 10 10 10 100

31 Advanced nuclear power production credit 0 0 80 180 220 240 270 280 280 270 180 2,000

32 Reduced tax rate for nuclear decommissioning 

funds

100 110 110 120 120 130 130 140 150 150 160 1,320

Natural resources and environment: 

33 Expensing of exploration and development costs, 

nonfuel minerals 

0 0 10 20 40 40 40 40 50 50 50 340

34 Excess of percentage over cost depletion, nonfuel 

minerals 

110 100 120 140 140 160 160 180 200 200 220 1,620

35 Exclusion of interest on bonds for water, sewage, 

and hazardous waste facilities

270 330 350 350 350 360 370 390 400 430 420 3,750

36 Capital gains treatment of certain timber income 130 130 140 140 150 150 170 190 200 210 220 1,700

37 Expensing of multiperiod timber growing costs 50 60 60 70 70 70 80 80 90 80 80 740

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

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

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

38 Tax incentives for preservation of historic 

structures 

660 610 590 670 820 930 1,000 1,030 1,060 1,070 1,090 8,870

39 Carbon oxide sequestration credit 14 123 277 449 646 873 1,111 1,319 1,511 1,694 1,905 9,908

40 Deduction for endangered species recovery 

expenditures

30 30 30 30 40 40 40 60 60 60 70 460

Agriculture: 

41 Expensing of certain capital outlays 80 120 160 160 170 180 220 240 250 260 270 2,030

42 Expensing of certain multiperiod production costs 560 370 340 360 370 390 480 540 560 580 600 4,590

43 Treatment of loans forgiven for solvent farmers 50 50 60 60 60 60 70 70 70 70 70 640

44 Capital gains treatment of certain agriculture 

income 

1,330 1,340 1,370 1,410 1,470 1,540 1,720 1,900 1,990 2,090 2,190 17,020

45 Income averaging for farmers 170 180 200 200 210 220 230 230 230 230 230 2,160

46 Deferral of gain on sale of farm refiners 15 15 15 15 15 20 20 20 20 20 20 180

47 Expensing of reforestation expenditures 50 60 60 70 70 70 80 80 90 80 80 740

Commerce and housing: 

Financial institutions and insurance: 

48 Exemption of credit union income 2,140 2,080 2,120 2,170 2,350 2,410 2,450 2,650 2,740 2,790 2,830 24,564

49 Exclusion of life insurance death benefits 11,690 11,560 12,060 12,440 12,870 13,400 14,210 15,160 15,700 16,100 16,580 140,080

50 Exemption or special alternative tax for small 

property and casualty insurance companies 

110 120 120 130 130 130 140 140 150 150 160 1,370

51 Tax exemption of insurance income earned by taxexempt organizations320 320 340 350 350 360 360 370 380 380 390 3,600

52

Exclusion of interest spread of financial institutions

4,230 3,110 2,030 2,080 2,150 2,240 2,380 2,500 2,580 2,660 2,740 24,470

Housing: 

53 Exclusion of interest on owner-occupied mortgage 

subsidy bonds 

710 850 920 900 910 920 980 1,020 1,050 1,110 1,100 9,760

54 Exclusion of interest on rental housing bonds 1,200 1,430 1,550 1,530 1,530 1,560 1,640 1,720 1,770 1,870 1,870 16,470

55 Deductibility of mortgage interest on owneroccupied homes 24,730 25,440 26,170 26,920 28,340 30,250 67,330 89,630 95,150 100,420 106,330 595,980

56 Deductibility of State and local property tax on 

owner-occupied homes 17/

6,450 6,370 6,450 6,620 6,860 7,130 35,890 52,340 55,090 57,590 60,260 294,600

57 Deferral of income from installment sales 1,480 1,470 1,460 1,510 1,550 1,610 1,670 1,730 1,800 1,870 1,950 16,620

58 Capital gains exclusion on home sales 39,450 40,610 41,800 43,030 44,730 46,340 51,480 55,060 57,070 59,170 61,370 500,660

59 Exclusion of net imputed rental income 123,210 130,590 139,290 148,090 153,210 154,180 176,960 180,390 183,950 187,880 191,440 1,645,980

60 Exception from passive loss rules for $25,000 of 

rental loss 

5,700 5,540 5,870 6,210 6,460 6,860 7,490 7,600 7,700 7,770 7,850 69,350

61 Credit for low-income housing investments 6,310 8,900 11,280 10,540 10,390 10,360 10,430 10,710 10,980 11,270 11,570 106,430

62 Accelerated depreciation on rental housing (normal 

tax method) 

4,250 4,660 4,900 5,060 5,300 5,510 6,250 6,740 6,890 7,040 7,200 59,550

Commerce: 

63 Discharge of business indebtedness 40 30 40 20 20 10 30 30 30 30 40 280

64 Exceptions from imputed interest rules 60 60 70 70 70 80 80 90 90 100 100 810

65 Treatment of qualified dividends 29,450 30,760 32,130 33,560 34,710 36,250 39,120 42,250 44,290 46,140 48,030 387,240

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

and coal)

99,210 99,890 101,950 105,290 109,710 114,910 128,090 141,870 148,780 156,060 163,700 1,270,250

67 Capital gains exclusion of small corporation stock 1,410 1,530 1,640 1,750 1,850 1,930 2,000 2,080 2,160 2,250 2,350 19,540

68 Step-up basis of capital gains at death 35,460 37,780 40,260 42,910 45,510 48,050 50,350 54,840 58,340 61,790 65,620 505,450

69 Carryover basis of capital gains on gifts 2,610 3,050 3,560 3,820 4,070 4,090 4,750 5,430 5,270 5,210 5,300 44,550

70 Ordinary income treatment of loss from small 

business corporation stock sale 

70 70 70 70 80 80 80 80 90 90 90 800

71 Deferral of gains from like-kind exchanges 3,030 3,200 3,350 3,520 3,690 3,870 4,070 4,260 4,480 4,710 4,940 40,090

72 Depreciation of buildings other than rental housing 

(normal tax method) 

6,010 4,090 3,990 3,660 3,350 3,120 3,130 2,940 2,830 2,940 3,060 33,110

73 Accelerated depreciation of machinery and 

equipment (normal tax method) 

32,800 31,320 26,390 12,170 -2,370 -14,870 -26,700 -38,830 -30,520 -16,000 -7,310 -66,720

74 Expensing of certain small investments (normal tax 

method) 

-300 -1,630 -830 3,710 7,660 10,170 13,700 17,220 15,710 12,860 11,400 89,970

75 Exclusion of interest on small issue bonds 80 90 90 90 90 90 100 110 110 120 120 1,010

76 Special rules for certain film and TV production -190 -50 0 100 200 260 -420 -570 -270 -130 -50 -930

77 Allow 20-percent deduction to certain pass-through 

income

29,195 50,518 52,668 54,406 56,904 60,728 25,001 0 0 0 0 300,225

Transportation: 

78 Tonnage tax 140 140 140 140 140 140 140 140 140 140 140 1,400

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

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

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

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

80 Exclusion of reimbursed employee parking 

expenses 

1,686 1,759 1,861 2,006 2,063 2,130 2,238 2,343 2,448 2,565 2,740 22,153

81 Exclusion for employer-provided transit passes 341 363 397 442 463 487 530 565 609 653 741 5,250

82 Tax credit for certain expenditures for maintaining 

railroad tracks

140 170 170 130 80 60 40 30 30 20 10 740

83 Exclusion of interest on bonds for Highway 

Projects and rail-truck transfer facilities

170 160 160 140 140 130 130 120 110 110 100 1,300

Community and regional development: 

84 Investment credit for rehabilitation of structures 

(other than historic) 

10 0 0 0 0 0 0 0 0 0 0 0

85 Exclusion of interest for airport, dock, and similar 

bonds

720 850 930 910 920 930 990 1,030 1,060 1,120 1,120 9,860

86 Exemption of certain mutuals' and cooperatives' 

income 

90 90 100 100 100 100 100 110 110 110 110 1,030

87 Empowerment zones 160 130 90 100 110 110 90 60 40 20 20 770

88 New markets tax credit 1,280 1,290 1,320 1,280 1,170 1,110 1,130 1,100 970 780 560 10,710

89 Credit to holders of Gulf Tax Credit Bonds. 100 110 120 100 90 90 80 80 70 70 60 870

90 Recovery Zone Bonds 6/ 90 90 100 90 80 80 80 70 60 60 50 760

91 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 10 100

92 Opportunity Zones 3,770 2,680 2,850 1,960 2,000 1,920 -6,080 -9,170 540 730 900 -1,670

93 Employee retention credit 230 160 140 90 60 60 50 40 40 30 30 700

Education, training, employment, and social services: 

Education: 

94 Exclusion of scholarship and fellowship income 

(normal tax method) 

3,510 3,660 3,910 4,180 4,440 4,710 5,270 6,140 6,500 6,870 7,280 52,960

95 Tax credits and deductions for postsecondary 

education expenses 7/

10,730 10,070 14,140 14,450 14,450 14,310 14,180 14,350 14,130 13,930 13,710 137,720

96 Deductibility of student-loan interest 2,170 2,030 2,150 2,230 2,250 2,340 2,380 2,820 2,970 2,960 3,040 25,170

97

Qualified tuition programs (includes Education IRA)

2,420 2,670 2,950 3,280 3,680 4,160 5,130 6,160 7,320 8,830 10,840 55,020

98 Exclusion of interest on student-loan bonds 140 160 180 180 180 180 190 200 200 220 220 1,910

99 Exclusion of interest on bonds for private nonprofit 

educational facilities 

1,910 2,280 2,480 2,430 2,440 2,480 2,610 2,740 2,810 2,970 2,970 26,210

100 Credit for holders of zone academy bonds 8/ 150 130 110 90 80 60 50 50 40 40 40 690

101 Exclusion of interest on savings bonds redeemed to 

finance educational expenses

30 40 40 40 40 40 50 50 50 50 50 450

102 Parental personal exemption for students age 19 or 

over 

0 0 0 0 0 0 3,570 5,270 5,180 5,090 5,000 24,110

103

Deductibility of charitable contributions (education)

4,530 4,880 5,190 5,510 5,820 6,130 7,290 9,370 9,800 10,260 10,430 74,680

104 Exclusion of employer-provided educational 

assistance 

1,190 1,390 1,500 1,620 1,730 1,850 1,640 1,560 1,640 1,720 1,800 16,450

105 Special deduction for teacher expenses 170 170 170 170 170 170 180 210 210 210 220 1,880

106 Discharge of student loan indebtedness 80 80 90 100 110 120 150 170 190 220 240 1,470

107 Qualified school construction bonds 9/ 570 540 520 490 470 440 410 390 360 330 320 4,270

Training, employment, and social services: 

108 Work opportunity tax credit 1,650 1,690 1,780 1,830 1,890 1,950 1,300 530 370 280 200 11,820

109 Employer provided child care exclusion 580 570 570 610 650 690 920 1,060 1,120 1,190 1,260 8,640

110 Employer-provided child care credit 20 20 20 20 20 20 20 20 20 30 30 220

111 Assistance for adopted foster children 620 660 700 750 800 850 900 960 1,020 1,080 1,150 8,870

112 Adoption credit and exclusion 770 790 850 870 900 920 930 940 950 960 970 9,080

113 Exclusion of employee meals and lodging (other 

than military) 

3,290 4,320 6,430 6,100 5,610 5,900 6,940 7,530 7,750 8,030 8,360 66,970

114 Credit for child and dependent care expenses 3,190 3,080 3,300 3,440 3,530 3,580 3,700 3,880 3,970 4,060 4,160 36,700

115 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

116 Deductibility of charitable contributions, other than 

education and health

40,320 43,610 46,410 49,220 52,050 54,810 66,080 86,500 90,570 94,830 99,300 683,380

117 Exclusion of certain foster care payments 490 510 510 520 530 540 540 540 540 560 580 5,370

118 Exclusion of parsonage allowances 900 950 1,000 1,050 1,110 1,170 1,230 1,300 1,370 1,440 1,510 12,130

119 Indian employment credit 70 70 50 30 30 30 20 20 20 10 10 290

120 Credit for employer differential wage payments 0 0 0 0 0 0 10 10 10 20 20 70

Health: 

121 Exclusion of employer contributions for medical 

insurance premiums and medical care 10/

191,350 197,530 211,550 224,320 235,050 248,420 290,960 322,500 340,250 358,670 377,880 2,807,130

122 Self-employed medical insurance premiums 7,430 7,740 8,150 8,720 9,290 9,930 11,330 12,450 13,140 13,820 14,550 109,120

123 Medical Savings Accounts / Health Savings 

Accounts

5,330 4,540 4,680 4,890 5,080 5,260 5,970 6,440 6,660 6,890 7,130 57,540

124 Deductibility of medical expenses 7,100 7,960 8,480 9,250 10,050 10,900 16,800 20,970 22,760 24,630 26,610 158,410

125

Exclusion of interest on hospital construction bonds

2,730 3,250 3,540 3,470 3,480 3,540 3,740 3,920 4,010 4,260 4,250 37,460

126 Refundable Premium Assistance Tax Credit 11/ 7,960 6,220 6,180 6,380 6,670 6,590 7,520 7,710 8,060 8,390 8,800 72,520

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

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

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

127 Credit for employee health insurance expenses of 

small business 12/

40 40 30 10 10 0 0 0 0 0 0 90

128 Deductibility of charitable contributions (health) 8,230 8,820 9,350 9,870 10,400 10,910 12,390 14,870 15,560 16,260 16,990 125,420

129 Tax credit for orphan drug research 1,720 2,080 2,500 3,010 3,620 4,380 5,270 6,360 7,660 9,240 11,140 55,260

130 Special Blue Cross/Blue Shield tax benefits 140 190 250 280 300 320 340 360 380 410 440 3,270

131 Tax credit for health insurance purchased by 

certain displaced and retired individuals 13/

0 0 0 0 0 0 0 0 0 0 0 0

132 Distributions from retirement plans for premiums 

for health and long-term care insurance

430 450 460 470 490 500 590 630 650 660 670 5,570

133 Credit for family and sick leave taken by selfemployed individuals 14/500 590 90 0 0 0 0 0 0 0 0 680

Income security: 

134 Child credit 15/ 70,170 73,320 74,420 76,760 77,170 77,690 55,090 21,160 20,960 20,780 20,570 517,920

135 Exclusion of railroad retirement (Social Security 

equivalent) benefits 

310 290 270 250 240 220 220 210 180 160 140 2,180

136 Exclusion of workers' compensation benefits 9,160 9,200 9,250 9,290 9,330 9,370 9,420 9,460 9,500 9,550 9,590 93,960

137 Exclusion of public assistance benefits (normal tax 

method) 

580 600 620 640 670 680 690 710 720 720 710 6,760

138 Exclusion of special benefits for disabled coal 

miners 

20 30 20 20 20 20 20 20 10 10 10 180

139 Exclusion of military disability pensions 160 160 170 170 170 180 200 210 220 220 220 1,920

Net exclusion of pension contributions and 

earnings: 

140 Defined benefit employer plans 65,920 67,960 70,030 71,000 73,290 74,470 82,290 82,660 83,330 80,490 77,360 762,880

141 Defined contribution employer plans 80,690 87,610 93,380 98,720 101,970 106,200 126,010 130,550 135,700 141,480 147,230 1,168,850

142 Individual Retirement Accounts 16,510 17,360 17,880 18,940 20,000 20,660 24,770 26,070 27,510 28,820 30,330 232,340

143 Low and moderate income savers credit 1,220 1,220 1,260 1,300 1,270 1,270 1,440 1,410 1,400 1,400 1,390 13,360

144 Self-Employed plans 25,680 28,260 30,120 31,840 32,890 34,260 40,650 42,110 43,770 45,640 47,490 377,030

Exclusion of other employee benefits: 

145 Premiums on group term life insurance 2,160 2,990 3,160 3,300 3,420 3,530 4,030 4,290 4,430 4,570 4,720 38,440

146 Premiums on accident and disability insurance 330 340 340 340 350 350 350 350 350 350 350 3,470

147 Income of trusts to finance supplementary 

unemployment benefits 

20 10 20 20 30 30 40 50 50 60 60 370

148 Income of trusts to finance voluntary employee 

benefits associations 

1,090 1,070 1,120 1,170 1,230 1,300 1,440 1,510 1,590 1,680 1,760 13,870

149 Special ESOP rules 210 210 220 220 220 230 230 240 240 260 260 2,330

150 Additional deduction for the blind 30 40 40 40 40 40 40 50 50 50 50 440

151 Additional deduction for the elderly 5,680 5,810 5,950 8,390 6,630 7,150 6,060 6,540 6,960 7,320 7,830 68,640

152 Deductibility of casualty losses 0 0 0 0 0 0 623 959 993 1,019 1,048 4,641

153 Earned income tax credit 16/ 2,660 700 700 800 850 900 940 2,410 2,530 2,670 2,800 15,300

154 Recovery rebate credits 17/ 0 9,110 1,012 0 0 0 0 0 0 0 0 10,122

Social Security: 

Exclusion of social security benefits: 

155 Social Security benefits for retired and disabled 

workers and spouses, dependents and survivors

27,050 27,180 27,970 30,300 31,180 31,520 35,890 41,750 43,880 46,290 48,940 364,900

156 Credit for certain employer contributions to social 

security

720 990 1,360 1,490 1,590 1,690 1,790 1,890 1,990 2,090 2,190 17,070

Veterans benefits and services: 

157 Exclusion of veterans death benefits and disability 

compensation 

8,230 9,210 9,520 9,870 10,220 10,590 11,450 12,990 13,480 13,980 14,510 115,820

158 Exclusion of veterans pensions 210 220 220 220 220 220 230 250 250 260 260 2,350

159 Exclusion of GI bill benefits 1,460 1,580 1,590 1,650 1,720 1,780 1,930 2,200 2,290 2,380 2,480 19,600

160 Exclusion of interest on veterans housing bonds 70 80 80 90 80 90 90 100 100 100 110 920

General purpose fiscal assistance: 

161 Exclusion of interest on public purpose State and 

local bonds

24,310 28,980 31,500 30,920 31,020 31,500 33,290 34,950 35,730 37,890 37,830 333,610

162 Build America Bonds 18/ 0 0 0 0 0 0 0 0 0 0 0 0

163 Deductibility of nonbusiness State and local taxes 

other than on owner-occupied homes 19/

7,060 6,890 6,990 7,140 7,330 7,520 76,740 107,610 108,740 113,500 118,550 561,020

Interest: 

164 Deferral of interest on U.S. savings bonds 910 840 830 820 810 800 800 790 780 770 760 8,000

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

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

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 6,450 6,370 6,450 6,620 6,860 7,130 35,890 52,340 55,090 57,590 60,260 294,600

Nonbusiness State and local taxes other than on 

owner-occupied homes 

7,060 6,890 6,990 7,140 7,330 7,520 76,740 107,610 108,740 113,500 118,550 561,020

Exclusion of interest on State and local bonds for: 

Public purposes 24,310 28,980 31,500 30,920 31,020 31,500 33,290 34,950 35,730 37,890 37,830 333,610

Energy facilities 0 10 10 10 10 10 10 10 10 10 10 100

270 330 350 350 350 360 370 390 400 430 420 3,750

Small-issues 80 90 90 90 90 90 100 110 110 120 120 1,010

Owner-occupied mortgage subsidies 710 850 920 900 910 920 980 1,020 1,050 1,110 1,100 9,760

Rental housing 1,200 1,430 1,550 1,530 1,530 1,560 1,640 1,720 1,770 1,870 1,870 16,470

Airports, docks, and similar facilities 720 850 930 910 920 930 990 1,030 1,060 1,120 1,120 9,860

Student loans 140 160 180 180 180 180 190 200 200 220 220 1,910

Private nonprofit educational facilities 1,910 2,280 2,480 2,430 2,440 2,480 2,610 2,740 2,810 2,970 2,970 26,210

Hospital construction 2,730 3,250 3,540 3,470 3,480 3,540 3,740 3,920 4,010 4,260 4,250 37,460

Veterans' housing 70 80 80 90 80 90 90 100 100 100 110 920

1/

2/

3/

4/

5/

6/

7/

8/

9/

10/

11/

12/

13/

14/

15/

16/

17/

18/

19/

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

Total from corporations and individuals

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

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

2020 $20,200; 2021 $20,160; 2022 $21,090; 2023 $21,840; 2024 $22,920; 2025 $24,000; 2026 $159,760; 2027 $157,820; 2028 $164,500; 2029 $172,520; and 2030 $180,700.

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

2020 $66,420; 2021 $68,100; 2022 $68,210; 2023 $66,110; 2024 $67,210; 2025 $68,050; 2026 $68,470; 2027 $67.980; 2028 $68,580; 2029 $69,380; and 2030 $70,330.

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

2020 $274,650; 2021 $161,390; 2022 $1,630 and $0 thereafter.

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

2020 $1,980; 2021 $2,810; 2022 $2,790; 2023 $2,770; 2024 $2,750; 2025 $2,730; 2026 $2,710; 2027 $2,690; 2028 $2,670; 2029 $2,650, and 2030 $2,630.

In addition, the credit for sick and family leave taken by self-employed individuals has outlay effects of (in millions of dollars): 

2020 $0; 2021 $80; 2022 $20; 2023 $0; 2024 $0; 2025 $0; 2026 $0; 2027 $0, 2028 $0; 2029 $0; 2030 $0;

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

2020 $45,200; 2021 $43,100; 2022 $36,810; 2023 $35,340; 2024 $36,060; 2025 $35,780; 2026 $35,320; 2027 $22,740; 2028 $22,500; 2029 $22,230; and 2030 $22,060 .

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

2020 $9,690; 2021 $9,820; 2022 $9,890; 2023 $10,140; 2024 $10,270; 2025 $10,300; 2026 $5.920; 2027 $0; 2028 $0; 2029 $0; and 2030 0.

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

2020 $44,550; 2021 $43,440; 2022 $35,290; 2023 $33,700; 2024 $34,770; 2025 $35,610; 2026 $36,290; 2027 $37,330; 2028 $39,380; 2029 $41,790; and 2030 $43,890.

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

The outlays round down to zero.

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

$10 in 2020 and $0 thereafter.

2020 $2810; 2021 $2950; 2022 $2980; 2023 $3020; 2024 $3010; 2025 $2980; 2026 $2950; 2027 $2920; 2028 $2880; 2029 $2850; and 2030 $2810

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

2020 $30; 2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025 $40; 2026 $40; 2027 $40; 2028 $40; 2029 $40, and 2030 $40.

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

2020 $460; 2021 $570; 2022 $560; 2023 $560; 2024 $560; 2025 $550; 2026 $550; 2027 $550; 2028 $540; 2029 $540, and 2030 $540.

In addition, the employer contributions for health have effects on payroll tax receipts (in millions of dollars) as follows: 2020 $120,580; 2021 $131,100; 2022 $140,480;

2023 $147,030; 2024 $153,530; 2025 $161,600; 2026 $170,340; 2027 $179,460; 2028 $189,000; 2029 $198,890; and 2030 $209,140.

The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2020 $550; 2021 $1,020; 2022 $330 and $0 thereafter.

In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2020 $5,090; 2021 $3,000; 2022 $2,720; 2023 $1,340 and $0 

thereafter.

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

2020 $30; 2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025 $40; 2026, $40; 2027 $40; 2028 $40; 2029 $40, and 2030 $40.

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

2020 $30; 2021 $40; 2022 $40; 2023 $40; 2024 $40; 2025 $40; 2026, $40; 2027 $40; 2028 $40; 2029 $40, and 2030 $40.

2020 $90; 2021 $120; 2022 $120; 2023 $120; 2024 $110; 2025 $110; 2026, $110; 2027 $110; 2028 $110; 2029 $110, and 2030 $100.

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

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

, g , p 

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: $0 in 2019 and thereafter.
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

National Defense

1 Exclusion of benefits and allowances to armed forces personnel 

0 0 0 0 0 0 0 0 0 0 0 0

International affairs: 

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

3 Exclusion of certain allowances for Federal employees abroad

0 0 0 0 0 0 0 0 0 0 0 0

4

Reduced tax rate on active income of controlled foreign 

corporations (normal tax method)

27,390 29,580 32,020 33,760 35,500 37,300 29,190 30,380 30,690 31,160 31,830 321,410

5

Deduction for foreign-derived intangible income dervied from 

trade or business within the United States

9,450 10,200 11,050 11,650 12,250 12,870 7,620 7,930 8,010 8,140 8,310 98,030

6

Interest Charge Domestic International Sales Corporations (ICDISCs) 0 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7

Expensing of research and experimentation expenditures 

(normal tax method) 

4,240 3,490 -15,250 -23,930 -17,150 -10,250 -3,000 0 0 0 0 -66,090

8 Credit for increasing research activities 15,150 16,370 17,820 19,120 20,340 21,540 22,750 23,960 25,180 26,430 27,710 221,220

Energy: 

9 Expensing of exploration and development costs, fuels 10 -10 20 50 80 90 90 90 90 90 90 680

10 Excess of percentage over cost depletion, fuels 370 360 420 460 480 500 530 560 600 630 670 5,210

11

Exception from passive loss limitation for working interests in oil 

and gas properties 

0 0 0 0 0 0 0 0 0 0 0 0

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

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

14 Enhanced oil recovery credit 450 480 530 630 830 1,030 1,130 1,190 1,240 1,290 1,330 9,680

15 Energy production credit 1/ 4,520 4,750 4,660 4,880 5,190 5,410 5,170 5,010 4,730 4,380 3,850 48,030

16 Marginal wells credit 130 210 260 240 180 120 80 30 20 0 0 1,140

17 Energy investment credit 1/ 5,560 5,800 6,470 6,220 6,770 6,910 6,390 6,310 5,070 4,100 2,940 56,980

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

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

10 20 20 10 0 0 0 0 0 0 0 50

20

Tax credits for clean-fuel burning vehicles and refueling 

property

170 140 150 130 110 100 90 70 60 60 70 980

21 Exclusion of utility conservation subsidies 0 0 0 0 0 0 0 0 0 0 0 0

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

23 Credit for investment in clean coal facilities 30 30 20 10 30 30 30 30 40 30 30 280

24

Amortize all geological and geophysical expenditures over 2 

years

30 30 30 40 40 40 40 40 40 30 30 360

25

Allowance of deduction for certain energy efficient commercial 

building property

10 40 20 20 20 20 20 20 20 20 20 220

26 Credit for construction of new energy efficient homes 210 230 160 160 150 160 170 110 40 10 0 1,190

27 Credit for energy efficiency improvements to existing homes

0 0 0 0 0 0 0 0 0 0 0 0

28 Credit for residential energy efficient property 0 0 0 0 0 0 0 0 0 0 0 0

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

30 Advanced Energy Property Credit 10 10 10 10 10 10 10 10 10 10 10 100

31 Advanced nuclear power production credit 0 0 80 180 220 240 270 280 280 270 180 2,000

32 Reduced tax rate for nuclear decommissioning funds 100 110 110 120 120 130 130 140 150 150 160 1,320

Natural resources and environment: 

33

Expensing of exploration and development costs, nonfuel 

minerals 

0 0 0 0 10 10 10 10 10 10 10 70

34 Excess of percentage over cost depletion, nonfuel minerals 

70 60 70 80 80 90 90 100 110 110 120 910

35

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

30 50 50 40 40 50 50 60 70 80 70 560

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

37 Expensing of multiperiod timber growing costs 10 10 10 10 10 10 10 10 10 10 10 100

38 Tax incentives for preservation of historic structures 520 480 470 540 660 740 800 820 840 850 870 7,070

39 Carbon oxide sequestration credit 14 123 277 449 646 873 1,111 1,319 1,511 1,694 1,905 9,908

40 Deduction for endangered species recovery expenditures 10 10 10 10 10 10 10 20 20 20 20 140

Agriculture: 

41 Expensing of certain capital outlays 0 0 10 10 10 10 10 10 10 10 10 90

42 Expensing of certain multiperiod production costs 20 10 10 10 10 10 10 20 20 20 20 140

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

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

45 Income averaging for farmers 0 0 0 0 0 0 0 0 0 0 0 0

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

47 Expensing of reforestation expenditures 10 10 10 10 10 10 10 10 10 10 10 100

Commerce and housing: 

Financial institutions and insurance: 

48 Exemption of credit union income 2,135 2,076 2,118 2,173 2,353 2,406 2,446 2,645 2,737 2,785 2,825 24,564

49 Exclusion of life insurance death benefits 1,180 1,190 1,240 1,280 1,310 1,330 1,360 1,380 1,410 1,430 1,460 13,390

50

Exemption or special alternative tax for small property and 

casualty insurance companies 

930 1,000 1,080 1,110 1,140 1,160 1,210 1,240 1,270 1,300 1,350 11,860

51

Tax exemption of insurance income earned by tax-exempt 

organizations

320 320 340 350 350 360 360 370 380 380 390 3,600

52 Exclusion of interest spread of financial institutions 0 0 0 0 0 0 0 0 0 0 0 0

Housing: 

53

Exclusion of interest on owner-occupied mortgage subsidy 

bonds 

80 120 130 100 110 120 140 160 180 200 190 1,450

54 Exclusion of interest on rental housing bonds 140 210 220 180 180 210 230 270 300 340 330 2,470

55 Deductibility of mortgage interest on owner-occupied homes 

0 0 0 0 0 0 0 0 0 0 0 0

56

Deductibility of State and local property tax on owner-occupied 

homes 

0 0 0 0 0 0 0 0 0 0 0 0

57 Deferral of income from installment sales 0 0 0 0 0 0 0 0 0 0 0 0

58 Capital gains exclusion on home sales 0 0 0 0 0 0 0 0 0 0 0 0

59 Exclusion of net imputed rental income 0 0 0 0 0 0 0 0 0 0 0 0

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

0 0 0 0 0 0 0 0 0 0 0 0

61 Credit for low-income housing investments 6,010 8,430 10,720 10,020 9,870 9,840 9,910 10,170 10,430 10,710 10,990 101,090

62 Accelerated depreciation on rental housing (normal tax method) 

60 60 60 60 70 80 90 80 90 90 100 780

Commerce: 

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

Total from corporations
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

63 Discharge of business indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

64 Exceptions from imputed interest rules 0 0 0 0 0 0 0 0 0 0 0 0

65 Treatment of qualified dividends 0 0 0 0 0 0 0 0 0 0 0 0

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

0 0 0 0 0 0 0 0 0 0 0 0

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

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

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

70

Ordinary income treatment of loss from small business 

corporation stock sale 

0 0 0 0 0 0 0 0 0 0 0 0

71 Deferral of gains from like-kind exchanges 1,060 1,120 1,170 1,230 1,290 1,350 1,420 1,480 1,560 1,640 1,720 13,980

72

Depreciation of buildings other than rental housing (normal tax 

method) 

1,210 720 590 500 440 390 360 310 320 380 440 4,450

73

Accelerated depreciation of machinery and equipment (normal 

tax method) 

15,970 13,630 9,520 4,610 -2,030 -9,120 -14,500 -18,770 -14,760 -8,380 -4,440 -44,240

74 Expensing of certain small investments (normal tax method) 370 -20 20 110 360 620 800 940 810 600 480 4,720

75 Exclusion of interest on small issue bonds 10 10 10 10 10 10 10 20 20 20 20 140

76 Special rules for certain film and TV production -110 -30 0 60 110 150 -230 -310 -150 -70 -30 -500

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

Transportation: 

78 Tonnage tax 140 140 140 140 140 140 140 140 140 140 140 1,400

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

80 Exclusion of reimbursed employee parking expenses -1,208 -1,255 -1,328 -1,368 -1,419 -1,486 -1,553 -1,621 -1,697 -1,778 -1,814 -15,319

81 Exclusion for employer-provided transit passes -407 -435 -472 -498 -529 -569 -608 -653 -699 -750 -765 -5,978

82

Tax credit for certain expenditures for maintaining railroad 

tracks

90 110 110 80 50 40 30 20 20 10 10 480

83

Exclusion of interest on bonds for Highway Projects and railtruck transfer facilities40 40 40 30 30 30 30 30 20 20 20 290

Community and regional development: 

84

Investment credit for rehabilitation of structures (other than 

historic) 

10 0 0 0 0 0 0 0 0 0 0 0

85 Exclusion of interest for airport, dock, and similar bonds 90 120 130 100 110 120 140 160 180 200 200 1,460

86 Exemption of certain mutuals' and cooperatives' income 90 90 100 100 100 100 100 110 110 110 110 1,030

87 Empowerment zones 90 80 70 70 80 80 60 40 30 20 20 550

88 New markets tax credit 1,250 1,260 1,290 1,250 1,140 1,080 1,100 1,070 940 760 540 10,430

89 Credit to holders of Gulf Tax Credit Bonds. 10 20 20 10 10 10 10 10 10 10 10 120

90 Recovery Zone Bonds 6/ 10 10 10 10 10 10 10 10 10 10 10 100

91 Tribal Economic Development Bonds 0 0 0 0 0 0 0 0 0 0 0 0

92 Opportunity Zones 1,260 1,150 990 780 760 760 -3,560 -2,470 220 300 350 -720

93 Employee retention credit 190 130 110 70 50 50 40 30 30 20 20 550

Education, training, employment, and social services: 

Education: 

94

Exclusion of scholarship and fellowship income (normal tax 

method) 

0 0 0 0 0 0 0 0 0 0 0 0

95

Tax credits and deductions for postsecondary education 

expenses 7/

0 0 0 0 0 0 0 0 0 0 0 0

96 Deductibility of student-loan interest 0 0 0 0 0 0 0 0 0 0 0 0

97 Qualified tuition programs (includes Education IRA) 0 0 0 0 0 0 0 0 0 0 0 0

98 Exclusion of interest on student-loan bonds 20 20 30 20 20 20 30 30 30 40 40 280

99

Exclusion of interest on bonds for private nonprofit educational 

facilities 

230 330 360 280 290 330 370 430 470 540 520 3,920

100 Credit for holders of zone academy bonds 8/ 150 130 110 90 80 60 50 50 40 40 40 690

101

Exclusion of interest on savings bonds redeemed to finance 

educational expenses

0 0 0 0 0 0 0 0 0 0 0 0

102 Parental personal exemption for students age 19 or over 0 0 0 0 0 0 0 0 0 0 0 0

103 Deductibility of charitable contributions (education) 610 630 670 700 740 770 810 840 870 900 940 7,870

104 Exclusion of employer-provided educational assistance 0 0 0 0 0 0 0 0 0 0 0 0

105 Special deduction for teacher expenses 0 0 0 0 0 0 0 0 0 0 0 0

106 Discharge of student loan indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

107 Qualified school construction bonds 9/ 140 130 130 120 120 110 100 100 90 80 80 1,060

Training, employment, and social services: 

108 Work opportunity tax credit 1,240 1,280 1,340 1,380 1,430 1,470 920 410 290 220 160 8,900

109 Employer provided child care exclusion 0 0 0 0 0 0 0 0 0 0 0 0

110 Employer-provided child care credit 20 20 20 20 20 20 20 20 20 30 30 220

111 Assistance for adopted foster children 0 0 0 0 0 0 0 0 0 0 0 0

112 Adoption credit and exclusion 0 0 0 0 0 0 0 0 0 0 0 0

113 Exclusion of employee meals and lodging (other than military) 

-490 -210 -140 -560 -840 -870 -910 -940 -980 -1,020 -1,060 -7,530

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

115 Credit for disabled access expenditures 0 0 0 0 0 0 0 0 0 0 0 0

116

Deductibility of charitable contributions, other than education 

and health

1,230 1,270 1,320 1,370 1,420 1,480 1,550 1,610 1,670 1,730 1,800 15,220

117 Exclusion of certain foster care payments 0 0 0 0 0 0 0 0 0 0 0 0

118 Exclusion of parsonage allowances 0 0 0 0 0 0 0 0 0 0 0 0

119 Indian employment credit 40 40 30 10 10 10 10 10 10 0 0 130

120 Credit for employer differential wage payments 0 0 0 0 0 0 10 10 10 10 10 50

Health: 

121

Exclusion of employer contributions for medical insurance 

premiums and medical care 10/

0 0 0 0 0 0 0 0 0 0 0 0

122 Self-employed medical insurance premiums 0 0 0 0 0 0 0 0 0 0 0 0

123 Medical Savings Accounts / Health Savings Accounts 0 0 0 0 0 0 0 0 0 0 0 0

124 Deductibility of medical expenses 0 0 0 0 0 0 0 0 0 0 0 0

125 Exclusion of interest on hospital construction bonds 330 470 510 400 420 470 530 620 670 780 750 5,620

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

127

Credit for employee health insurance expenses of small 

business 12/

10 10 10 0 0 0 0 0 0 0 0 20

128 Deductibility of charitable contributions (health) 3,880 4,110 4,330 4,540 4,760 4,980 5,200 5,420 5,660 5,890 6,130 51,020

129 Tax credit for orphan drug research 1,710 2,070 2,490 3,000 3,610 4,360 5,250 6,340 7,640 9,220 11,120 55,100

130 Special Blue Cross/Blue Shield tax benefits 140 190 250 280 300 320 340 360 380 410 440 3,270

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

Total from corporations
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

131

Tax credit for health insurance purchased by certain displaced 

and retired individuals 13/

0 0 0 0 0 0 0 0 0 0 0 0

132

Distributions from retirement plans for premiums for health and 

long-term care insurance

0 0 0 0 0 0 0 0 0 0 0 0

133

Credit for family and sick leave taken by self-employed 

individuals 14/

0 0 0 0 0 0 0 0 0 0 0 0

Income security: 

134 Child credit 14/ 0 0 0 0 0 0 0 0 0 0 0 0

135

Exclusion of railroad retirement (Social Security equivalent) 

benefits 

0 0 0 0 0 0 0 0 0 0 0 0

136 Exclusion of workers' compensation benefits 0 0 0 0 0 0 0 0 0 0 0 0

137 Exclusion of public assistance benefits (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

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

139 Exclusion of military disability pensions 0 0 0 0 0 0 0 0 0 0 0 0

Net exclusion of pension contributions and earnings: 

140 Defined benefit employer plans 0 0 0 0 0 0 0 0 0 0 0 0

141 Defined contribution employer plans 0 0 0 0 0 0 0 0 0 0 0 0

142 Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

143 Low and moderate income savers credit 0 0 0 0 0 0 0 0 0 0 0 0

144 Self-Employed plans 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of other employee benefits: 

145 Premiums on group term life insurance 0 0 0 0 0 0 0 0 0 0 0 0

146 Premiums on accident and disability insurance 0 0 0 0 0 0 0 0 0 0 0 0

147

Income of trusts to finance supplementary unemployment 

benefits 

0 0 0 0 0 0 0 0 0 0 0 0

148

Income of trusts to finance voluntary employee benefits 

associations 

1,090 1,070 1,120 1,170 1,230 1,300 1,440 1,510 1,590 1,680 1,760 13,870

149 Special ESOP rules 180 180 190 190 190 200 200 210 210 220 220 2,010

150 Additional deduction for the blind 0 0 0 0 0 0 0 0 0 0 0 0

151 Additional deduction for the elderly 0 0 0 0 0 0 0 0 0 0 0 0

152 Deductibility of casualty losses 0 0 0 0 0 0 0 0 0 0 0 0

153 Earned income tax credit 15/ 0 0 0 0 0 0 0 0 0 0 0 0

154 Recovery rebate credits 16/ 0 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 

155

Social Security benefits for retired and disabled workers and 

spouses, dependents and survivors

0 0 0 0 0 0 0 0 0 0 0 0

156 Credit for certain employer contributions to social security 150 210 290 320 340 360 380 400 420 440 460 3,620

Veterans benefits and services: 

157

Exclusion of veterans death benefits and disability 

compensation 

0 0 0 0 0 0 0 0 0 0 0 0

158 Exclusion of veterans pensions 0 0 0 0 0 0 0 0 0 0 0 0

159 Exclusion of GI bill benefits 0 0 0 0 0 0 0 0 0 0 0 0

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

General purpose fiscal assistance: 

161 Exclusion of interest on public purpose State and local bonds

2,900 4,210 4,520 3,540 3,710 4,160 4,720 5,520 5,990 6,910 6,650 49,930

162 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

163

Deductibility of nonbusiness State and local taxes other than on 

owner-occupied homes 

0 0 0 0 0 0 0 0 0 0 0 0

Interest: 

164 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 owneroccupied homes 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of interest on State and local bonds for: 

Public purposes 2,900 4,210 4,520 3,540 3,710 4,160 4,720 5,520 5,990 6,910 6,650 49,930

Energy facilities 0 0 0 0 0 0 0 0 0 0 0 0

30 50 50 40 40 50 50 60 70 80 70 560

Small-issues 10 10 10 10 10 10 10 20 20 20 20 140

Owner-occupied mortgage subsidies 80 120 130 100 110 120 140 160 180 200 190 1,450

Rental housing 140 210 220 180 180 210 230 270 300 340 330 2,470

Airports, docks, and similar facilities 90 120 130 100 110 120 140 160 180 200 200 1,460

Student loans 20 20 30 20 20 20 30 30 30 40 40 280

Private nonprofit educational facilities 230 330 360 280 290 330 370 430 470 540 520 3,920

Hospital construction 330 470 510 400 420 470 530 620 670 780 750 5,620

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

(in millions of dollars)

Total from corporations

Water, sewage, and hazardous waste disposal facilities 

See Table 1 footnotes for specific table information

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

National Defense

1

Exclusion of benefits and allowances to armed forces 

personnel 

12,910 13,940 14,460 15,010 13,770 13,890 14,380 14,990 15,660 16,390 17,160 149,650

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 6,160 6,470 6,790 7,130 7,490 7,860 8,260 8,670 9,100 9,560 10,040 81,370

3

Exclusion of certain allowances for Federal employees 

abroad

270 280 290 310 320 340 360 370 390 410 430

3,500

4

Reduced tax rate on active income of controlled foreign 

corporations (normal tax method)

180 200 210 230 240 250 200 200 210 210 210

2,150

5

Deduction for foreign-derived intangible income dervied from 

trade or business within the United States

0 0 0 0 0 0 0 0 0 0 0

0

6

Interest Charge Domestic International Sales Corporations 

(IC-DISCs) 

890 1,370 1,440 1,510 1,590 1,690 2,010 2,280 2,410 2,520 2,600

19,420

General science, space, and technology: 

7

Expensing of research and experimentation expenditures 

(normal tax method) 

1,180 490 -1,850 -5,210 -5,050 -3,350 -1,180 0 0 0 0 -16,150

8 Credit for increasing research activities 1,790 1,930 2,090 2,240 2,380 2,520 2,670 2,830 2,990 3,170 3,360 26,180

Energy: 

9 Expensing of exploration and development costs, fuels 30 -30 70 180 300 340 370 390 400 410 400 2,830

10 Excess of percentage over cost depletion, fuels 220 240 300 330 350 370 420 460 490 520 540 4,020

11

Exception from passive loss limitation for working interests in 

oil and gas properties 

20 20 10 20 20 20 20 20 20 20 20

190

12 Capital gains treatment of royalties on coal 100 70 50 50 50 50 60 60 60 70 70 590

13 Exclusion of interest on energy facility bonds 0 10 10 10 10 10 10 10 10 10 10 100

14 Enhanced oil recovery credit 20 20 30 30 50 50 60 60 70 70 70 510

15 Energy production credit 1/ 500 530 520 540 580 600 570 560 530 490 430 5,350

16 Marginal wells credit 20 40 50 40 30 20 10 10 0 0 0 200

17 Energy investment credit 1/ 510 530 580 560 610 630 580 570 450 350 240 5,100

18 Alcohol fuel credits 2/ 0 10 0 0 0 0 0 0 0 0 0 10

19 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 20 20 20 10 0 0 0 0 0 0 0 50

20

Tax credits for clean-fuel burning vehicles and refueling 

property

400 300 330 310 270 260 240 200 180 170 160 2,420

21 Exclusion of utility conservation subsidies 60 60 50 50 50 40 40 40 30 30 30 420

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

23 Credit for investment in clean coal facilities 0 0 0 0 0 0 0 0 0 0 0 0

24

Amortize all geological and geophysical expenditures over 2 

years

50 50 60 60 70 70 70 70 70 70 70 660

25

Allowance of deduction for certain energy efficient 

commercial building property

150 150 110 90 90 90 90 90 90 90 90 980

26 Credit for construction of new energy efficient homes 110 140 120 100 100 100 100 60 20 10 0 750

27 Credit for energy efficiency improvements to existing homes 240 240 120 0 0 0 0 0 0 0 0 360

28 Credit for residential energy efficient property 2,370 2,390 1,980 1,450 420 120 0 0 0 0 0 6,360

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

30 Advanced Energy Property Credit 0 0 0 0 0 0 0 0 0 0 0 0

31 Advanced nuclear power production credit 0 0 0 0 0 0 0 0 0 0 0 0

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

Natural resources and environment: 

33

Expensing of exploration and development costs, nonfuel 

minerals 

0 0 10 20 30 30 30 30 40 40 40

270

34 Excess of percentage over cost depletion, nonfuel minerals 40 40 50 60 60 70 70 80 90 90 100 710

35

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

240 280 300 310 310 310 320 330 330 350 350

3,190

36 Capital gains treatment of certain timber income 130 130 140 140 150 150 170 190 200 210 220 1,700

37 Expensing of multiperiod timber growing costs 40 50 50 60 60 60 70 70 80 70 70 640

38 Tax incentives for preservation of historic structures 140 130 120 130 160 190 200 210 220 220 220 1,800

39 Carbon oxide sequestration credit 0 0 0 0 0 0 0 0 0 0 0 0

40 Deduction for endangered species recovery expenditures 20 20 20 20 30 30 30 40 40 40 50 320

Agriculture: 

41 Expensing of certain capital outlays 80 120 150 150 160 170 210 230 240 250 260 1,940

42 Expensing of certain multiperiod production costs 540 360 330 350 360 380 470 520 540 560 580 4,450

43 Treatment of loans forgiven for solvent farmers 50 50 60 60 60 60 70 70 70 70 70 640

44 Capital gains treatment of certain agriculture income 1,330 1,340 1,370 1,410 1,470 1,540 1,720 1,900 1,990 2,090 2,190 17,020

45 Income averaging for farmers 170 180 200 200 210 220 230 230 230 230 230 2,160

46 Deferral of gain on sale of farm refiners 15 15 15 15 15 20 20 20 20 20 20 180

47 Expensing of reforestation expenditures 40 50 50 60 60 60 70 70 80 70 70 640

Commerce and housing: 

Financial institutions and insurance: 

48 Exemption of credit union income 0 0 0 0 0 0 0 0 0 0 0 0

49 Exclusion of life insurance death benefits 10,510 10,370 10,820 11,160 11,560 12,070 12,850 13,780 14,290 14,670 15,120 126,690

50

Exemption or special alternative tax for small property and 

casualty insurance companies 

0 0 0 0 0 0 0 0 0 0 0

0

51

Tax exemption of insurance income earned by tax-exempt 

organizations

0 0 0 0 0 0 0 0 0 0 0

0

52 Exclusion of interest spread of financial institutions 4,230 3,110 2,030 2,080 2,150 2,240 2,380 2,500 2,580 2,660 2,740 24,470

Housing: 

53

Exclusion of interest on owner-occupied mortgage subsidy 

bonds 

630 730 790 800 800 800 840 860 870 910 910

8,310

54 Exclusion of interest on rental housing bonds 1,060 1,220 1,330 1,350 1,350 1,350 1,410 1,450 1,470 1,530 1,540 14,000

55 Deductibility of mortgage interest on owner-occupied homes 24,730 25,440 26,170 26,920 28,340 30,250 67,330 89,630 95,150 100,420 106,330 595,980

56

Deductibility of State and local property tax on owneroccupied homes 6,450 6,370 6,450 6,620 6,860 7,130 35,890 52,340 55,090 57,590 60,260 294,600

57 Deferral of income from installment sales 1,480 1,470 1,460 1,510 1,550 1,610 1,670 1,730 1,800 1,870 1,950 16,620

58 Capital gains exclusion on home sales 39,450 40,610 41,800 43,030 44,730 46,340 51,480 55,060 57,070 59,170 61,370 500,660

59 Exclusion of net imputed rental income 123,210 130,590 139,290 148,090 153,210 154,180 176,960 180,390 183,950 187,880 191,440 1,645,980

60 Exception from passive loss rules for $25,000 of rental loss 5,700 5,540 5,870 6,210 6,460 6,860 7,490 7,600 7,700 7,770 7,850 69,350

61 Credit for low-income housing investments 300 470 560 520 520 520 520 540 550 560 580 5,340

62

Accelerated depreciation on rental housing (normal tax 

method) 

4,190 4,600 4,840 5,000 5,230 5,430 6,160 6,660 6,800 6,950 7,100 58,770

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

Total from individuals
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

Commerce: 

63 Discharge of business indebtedness 40 30 40 20 20 10 30 30 30 30 40 280

64 Exceptions from imputed interest rules 60 60 70 70 70 80 80 90 90 100 100 810

65 Treatment of qualified dividends 29,450 30,760 32,130 33,560 34,710 36,250 39,120 42,250 44,290 46,140 48,030 387,240

66 Capital gains (except agriculture, timber, iron ore, and coal) 99,210 99,890 101,950 105,290 109,710 114,910 128,090 141,870 148,780 156,060 163,700 1,270,250

67 Capital gains exclusion of small corporation stock 1,410 1,530 1,640 1,750 1,850 1,930 2,000 2,080 2,160 2,250 2,350 19,540

68 Step-up basis of capital gains at death 35,460 37,780 40,260 42,910 45,510 48,050 50,350 54,840 58,340 61,790 65,620 505,450

69 Carryover basis of capital gains on gifts 2,610 3,050 3,560 3,820 4,070 4,090 4,750 5,430 5,270 5,210 5,300 44,550

70

Ordinary income treatment of loss from small business 

corporation stock sale 

70 70 70 70 80 80 80 80 90 90 90 800

71 Deferral of gains from like-kind exchanges 1,970 2,080 2,180 2,290 2,400 2,520 2,650 2,780 2,920 3,070 3,220 26,110

72

Depreciation of buildings other than rental housing (normal tax 

method) 

4,800 3,370 3,400 3,160 2,910 2,730 2,770 2,630 2,510 2,560 2,620 28,660

73

Accelerated depreciation of machinery and equipment 

(normal tax method) 

16,830 17,690 16,870 7,560 -340 -5,750 -12,200 -20,060 -15,760 -7,620 -2,870 -22,480

74 Expensing of certain small investments (normal tax method) -670 -1,610 -850 3,600 7,300 9,550 12,900 16,280 14,900 12,260 10,920 85,250

75 Exclusion of interest on small issue bonds 70 80 80 80 80 80 90 90 90 100 100 870

76 Special rules for certain film and TV production -80 -20 0 40 90 110 -190 -260 -120 -60 -20 -430

77 Allow 20-percent deduction to certain pass-through income 29,195 50,518 52,668 54,406 56,904 60,728 25,001 0 0 0 0 300,225

Transportation: 

78 Tonnage tax 0 0 0 0 0 0 0 0 0 0 0 0

79 Deferral of tax on shipping companies 0 0 0 0 0 0 0 0 0 0 0 0

80 Exclusion of reimbursed employee parking expenses 2,894 3,014 3,189 3,374 3,482 3,616 3,791 3,964 4,145 4,343 4,554 37,472

81 Exclusion for employer-provided transit passes 748 798 869 940 992 1,056 1,138 1,218 1,308 1,403 1,506 11,228

82

Tax credit for certain expenditures for maintaining railroad 

tracks

50 60 60 50 30 20 10 10 10 10 0 260

83

Exclusion of interest on bonds for Highway Projects and railtruck transfer facilities130 120 120 110 110 100 100 90 90 90 80 1,010

Community and regional development: 

84

Investment credit for rehabilitation of structures (other than 

historic) 

0 0 0 0 0 0 0 0 0 0 0 0

85 Exclusion of interest for airport, dock, and similar bonds 630 730 800 810 810 810 850 870 880 920 920 8,400

86 Exemption of certain mutuals' and cooperatives' income 0 0 0 0 0 0 0 0 0 0 0 0

87 Empowerment zones 70 50 20 30 30 30 30 20 10 0 0 220

88 New markets tax credit 30 30 30 30 30 30 30 30 30 20 20 280

89 Credit to holders of Gulf Tax Credit Bonds. 90 90 100 90 80 80 70 70 60 60 50 750

90 Recovery Zone Bonds 6/ 80 80 90 80 70 70 70 60 50 50 40 660

91 Tribal Economic Development Bonds 10 10 10 10 10 10 10 10 10 10 10 100

92 Opportunity Zones 2,510 1,530 1,860 1,180 1,240 1,160 -2,520 -6,700 320 430 550 -950

93 Employee retention credit 40 30 30 20 10 10 10 10 10 10 10 150

Education, training, employment, and social services: 

Education: 

94

Exclusion of scholarship and fellowship income (normal tax 

method) 

3,510 3,660 3,910 4,180 4,440 4,710 5,270 6,140 6,500 6,870 7,280 52,960

95

Tax credits and deductions for postsecondary education 

expenses 7/

10,730 10,070 14,140 14,450 14,450 14,310 14,180 14,350 14,130 13,930 13,710 137,720

96 Deductibility of student-loan interest 2,170 2,030 2,150 2,230 2,250 2,340 2,380 2,820 2,970 2,960 3,040 25,170

97 Qualified tuition programs (includes Education IRA) 2,420 2,670 2,950 3,280 3,680 4,160 5,130 6,160 7,320 8,830 10,840 55,020

98 Exclusion of interest on student-loan bonds 120 140 150 160 160 160 160 170 170 180 180 1,630

99

Exclusion of interest on bonds for private nonprofit 

educational facilities 

1,680 1,950 2,120 2,150 2,150 2,150 2,240 2,310 2,340 2,430 2,450 22,290

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

101

Exclusion of interest on savings bonds redeemed to finance 

educational expenses

30 40 40 40 40 40 50 50 50 50 50 450

102 Parental personal exemption for students age 19 or over 0 0 0 0 0 0 3,570 5,270 5,180 5,090 5,000 24,106

103 Deductibility of charitable contributions (education) 3,920 4,250 4,520 4,810 5,080 5,360 6,480 8,530 8,930 9,360 9,490 66,810

104 Exclusion of employer-provided educational assistance 1,190 1,390 1,500 1,620 1,730 1,850 1,640 1,560 1,640 1,720 1,800 16,450

105 Special deduction for teacher expenses 170 170 170 170 170 170 180 210 210 210 220 1,880

106 Discharge of student loan indebtedness 80 80 90 100 110 120 150 170 190 220 240 1,470

107 Qualified school construction bonds 9/ 430 410 390 370 350 330 310 290 270 250 240 3,210

Training, employment, and social services: 

108 Work opportunity tax credit 410 410 440 450 460 480 380 120 80 60 40 2,920

109 Employer provided child care exclusion 580 570 570 610 650 690 920 1,060 1,120 1,190 1,260 8,640

110 Employer-provided child care credit 0 0 0 0 0 0 0 0 0 0 0 0

111 Assistance for adopted foster children 620 660 700 750 800 850 900 960 1,020 1,080 1,150 8,870

112 Adoption credit and exclusion 770 790 850 870 900 920 930 940 950 960 970 9,080

113 Exclusion of employee meals and lodging (other than military) 

3,780 4,530 6,570 6,660 6,450 6,770 7,850 8,470 8,730 9,050 9,420 74,500

114 Credit for child and dependent care expenses 3,190 3,080 3,300 3,440 3,530 3,580 3,700 3,880 3,970 4,060 4,160 36,700

115 Credit for disabled access expenditures 10 10 10 10 10 10 10 10 10 10 10 100

116

Deductibility of charitable contributions, other than education 

and health

39,090 42,340 45,090 47,850 50,630 53,330 64,530 84,890 88,900 93,100 97,500 668,160

117 Exclusion of certain foster care payments 490 510 510 520 530 540 540 540 540 560 580 5,370

118 Exclusion of parsonage allowances 900 950 1,000 1,050 1,110 1,170 1,230 1,300 1,370 1,440 1,510 12,130

119 Indian employment credit 30 30 20 20 20 20 10 10 10 10 10 160

120 Credit for employer differential wage payments 0 0 0 0 0 0 0 0 0 10 10 20

Health: 

121

Exclusion of employer contributions for medical insurance 

premiums and medical care 10/

191,350 197,530 211,550 224,320 235,050 248,420 290,960 322,500 340,250 358,670 377,880 2,807,130

122 Self-employed medical insurance premiums 7,430 7,740 8,150 8,720 9,290 9,930 11,330 12,450 13,140 13,820 14,550 109,120

123 Medical Savings Accounts / Health Savings Accounts 5,330 4,540 4,680 4,890 5,080 5,260 5,970 6,440 6,660 6,890 7,130 57,540

124 Deductibility of medical expenses 7,100 7,960 8,480 9,250 10,050 10,900 16,800 20,970 22,760 24,630 26,610 158,410

125 Exclusion of interest on hospital construction bonds 2,400 2,780 3,030 3,070 3,060 3,070 3,210 3,300 3,340 3,480 3,500 31,840

126 Refundable Premium Assistance Tax Credit 11/ 7,960 6,220 6,180 6,380 6,670 6,590 7,520 7,710 8,060 8,390 8,800 72,520

127

Credit for employee health insurance expenses of small 

business 12/

30 30 20 10 10 0 0 0 0 0 0 70

128 Deductibility of charitable contributions (health) 4,350 4,710 5,020 5,330 5,640 5,930 7,190 9,450 9,900 10,370 10,860 74,400

129 Tax credit for orphan drug research 10 10 10 10 10 20 20 20 20 20 20 160

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

Total from individuals

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-30

131

Tax credit for health insurance purchased by certain 

displaced and retired individuals 13/

0 0 0 0 0 0 0 0 0 0 0 0

132

Distributions from retirement plans for premiums for health 

and long-term care insurance

430 450 460 470 490 500 590 630 650 660 670 5,570

133

Credit for family and sick leave taken by self-employed 

individuals 14/

500 590 90 0 0 0 0 0 0 0 0 680

Income security: 

134 Child credit 14/ 70,170 73,320 74,420 76,760 77,170 77,690 55,090 21,160 20,960 20,780 20,570 517,920

135 Exclusion of railroad retirement (Social Security equivalent) 310 290 270 250 240 220 220 210 180 160 140 2,180

136 Exclusion of workers' compensation benefits 9,160 9,200 9,250 9,290 9,330 9,370 9,420 9,460 9,500 9,550 9,590 93,960

137 Exclusion of public assistance benefits (normal tax method) 580 600 620 640 670 680 690 710 720 720 710 6,760

138 Exclusion of special benefits for disabled coal miners 20 30 20 20 20 20 20 20 10 10 10 180

139 Exclusion of military disability pensions 160 160 170 170 170 180 200 210 220 220 220 1,920

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

140 Defined benefit employer plans 65,920 67,960 70,030 71,000 73,290 74,470 82,290 82,660 83,330 80,490 77,360 762,880

141 Defined contribution employer plans 80,690 87,610 93,380 98,720 101,970 106,200 126,010 130,550 135,700 141,480 147,230 1,168,850

142 Individual Retirement Accounts 16,510 17,360 17,880 18,940 20,000 20,660 24,770 26,070 27,510 28,820 30,330 232,340

143 Low and moderate income savers credit 1,220 1,220 1,260 1,300 1,270 1,270 1,440 1,410 1,400 1,400 1,390 13,360

144 Self-Employed plans 25,680 28,260 30,120 31,840 32,890 34,260 40,650 42,110 43,770 45,640 47,490 377,030

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

145 Premiums on group term life insurance 2,160 2,990 3,160 3,300 3,420 3,530 4,030 4,290 4,430 4,570 4,720 38,440

146 Premiums on accident and disability insurance 330 340 340 340 350 350 350 350 350 350 350 3,470

147

Income of trusts to finance supplementary unemployment 

benefits 

20 10 20 20 30 30 40 50 50 60 60 370

148

Income of trusts to finance voluntary employee benefits 

associations 

0 0 0 0 0 0 0 0 0 0 0 0

149 Special ESOP rules 30 30 30 30 30 30 30 30 30 40 40 320

150 Additional deduction for the blind 30 40 40 40 40 40 40 50 50 50 50 440

151 Additional deduction for the elderly 5,680 5,810 5,950 8,390 6,630 7,150 6,060 6,540 6,960 7,320 7,830 68,640

152 Deductibility of casualty losses 0 0 0 0 0 0 620 960 990 1,020 1,050 4,640

153 Earned income tax credit 15/ 2,660 700 700 800 850 900 940 2,410 2,530 2,670 2,800 15,300

154 Recovery rebate credits 16/ 0 9,110 1,012 0 0 0 0 0 0 0 0 10,122

Social Security: 

Exclusion of social security benefits: 

155

Social Security benefits for retired and disabled workers and 

spouses, dependents and survivors

27,050 27,180 27,970 30,300 31,180 31,520 35,890 41,750 43,880 46,290 48,940 364,900

156 Credit for certain employer contributions to social security 570 780 1,070 1,170 1,250 1,330 1,410 1,490 1,570 1,650 1,730 13,450

Veterans benefits and services: 

157

Exclusion of veterans death benefits and disability 

compensation 

8,230 9,210 9,520 9,870 10,220 10,590 11,450 12,990 13,480 13,980 14,510 115,820

158 Exclusion of veterans pensions 210 220 220 220 220 220 230 250 250 260 260 2,350

159 Exclusion of GI bill benefits 1,460 1,580 1,590 1,650 1,720 1,780 1,930 2,200 2,290 2,380 2,480 19,600

160 Exclusion of interest on veterans housing bonds 60 70 70 80 70 80 80 80 80 80 90 780

General purpose fiscal assistance: 

161 Exclusion of interest on public purpose State and local bonds

21,410 24,770 26,980 27,380 27,310 27,340 28,570 29,430 29,740 30,980 31,180 283,680

162 Build America Bonds 16/ 0 0 0 0 0 0 0 0 0 0 0 0

163

Deductibility of nonbusiness State and local taxes other than 

on owner-occupied homes 17/

7,060 6,890 6,990 7,140 7,330 7,520 76,740 107,610 108,740 113,500 118,550 561,020

Interest: 

164 Deferral of interest on U.S. savings bonds 910 840 830 820 810 800 800 790 780 770 760 8,000

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 6,450 6,370 6,450 6,620 6,860 7,130 35,890 52,340 55,090 57,590 60,260 294,600

7,060 6,890 6,990 7,140 7,330 7,520 76,740 107,610 108,740 113,500 118,550 561,020

Exclusion of interest on State and local bonds for: 

Public purposes 21,410 24,770 26,980 27,380 27,310 27,340 28,570 29,430 29,740 30,980 31,180 283,680

Energy facilities 0 10 10 10 10 10 10 10 10 10 10 100

240 280 300 310 310 310 320 330 330 350 350 3,190

Small-issues 70 80 80 80 80 80 90 90 90 100 100 870

Owner-occupied mortgage subsidies 630 730 790 800 800 800 840 860 870 910 910 8,310

Rental housing 1,060 1,220 1,330 1,350 1,350 1,350 1,410 1,450 1,470 1,530 1,540 14,000

Airports, docks, and similar facilities 630 730 800 810 810 810 850 870 880 920 920 8,400

Student loans 120 140 150 160 160 160 160 170 170 180 180 1,630

Private nonprofit educational facilities 1,680 1,950 2,120 2,150 2,150 2,150 2,240 2,310 2,340 2,430 2,450 22,290

Hospital construction 2,400 2,780 3,030 3,070 3,060 3,070 3,210 3,300 3,340 3,480 3,500 31,840

Veterans' housing 60 70 70 80 70 80 80 80 80 80 90 780

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2020-2030

(in millions of dollars)

Total from individuals

Nonbusiness State and local taxes other than on ownerWater, sewage, and hazardous waste disposal facilities 

See Table 1 footnotes for specific table information
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

(in millions of dollars)

Provision 2020 2021 2021-30

121 Exclusion of employer contributions for medical insurance premiums and medical care 10/ 191,350 197,530 2,807,130

59 Exclusion of net imputed rental income 123,210 130,590 1,645,980

66 Capital gains (except agriculture, timber, iron ore, and coal) 99,210 99,890 1,270,250

141 Defined contribution employer plans 80,690 87,610 1,168,850

140 Defined benefit employer plans 65,920 67,960 762,880

116 Deductibility of charitable contributions, other than education and health 40,320 43,610 683,380

55 Deductibility of mortgage interest on owner-occupied homes 24,730 25,440 595,980

163 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 19/ 7,060 6,890 561,020

134 Child credit 15/ 70,170 73,320 517,920

68 Step-up basis of capital gains at death 35,460 37,780 505,450

58 Capital gains exclusion on home sales 39,450 40,610 500,660

65 Treatment of qualified dividends 29,450 30,760 387,240

144 Self-Employed plans 25,680 28,260 377,030

155 Social Security benefits for retired and disabled workers and spouses, dependents and survivors 27,050 27,180 364,900

161 Exclusion of interest on public purpose State and local bonds 24,310 28,980 333,610

4 Reduced tax rate on active income of controlled foreign corporations (normal tax method) 27,570 29,780 323,560

77 Allow 20-percent deduction to certain pass-through income 29,195 50,518 300,225

56 Deductibility of State and local property tax on owner-occupied homes 17/ 6,450 6,370 294,600

8 Credit for increasing research activities 16,940 18,300 247,400

142 Individual Retirement Accounts 16,510 17,360 232,340

124 Deductibility of medical expenses 7,100 7,960 158,410

1 Exclusion of benefits and allowances to armed forces personnel 12,910 13,940 149,650

49 Exclusion of life insurance death benefits 11,690 11,560 140,080

95 Tax credits and deductions for postsecondary education expenses 7/ 10,730 10,070 137,720

128 Deductibility of charitable contributions (health) 8,230 8,820 125,420

157 Exclusion of veterans death benefits and disability compensation 8,230 9,210 115,820

122 Self-employed medical insurance premiums 7,430 7,740 109,120

61 Credit for low-income housing investments 6,310 8,900 106,430

5 Deduction for foreign-derived intangible income dervied from trade or business within the United States 9,450 10,200 98,030

136 Exclusion of workers' compensation benefits 9,160 9,200 93,960

74 Expensing of certain small investments (normal tax method) -300 -1,630 89,970

2 Exclusion of income earned abroad by U.S. citizens 6,160 6,470 81,370

103 Deductibility of charitable contributions (education) 4,530 4,880 74,680

126 Refundable Premium Assistance Tax Credit 11/ 7,960 6,220 72,520

60 Exception from passive loss rules for $25,000 of rental loss 5,700 5,540 69,350

151 Additional deduction for the elderly 5,680 5,810 68,640

113 Exclusion of employee meals and lodging (other than military) 3,290 4,320 66,970

17 Energy investment credit 1/ 6,070 6,330 62,080

62 Accelerated depreciation on rental housing (normal tax method) 4,250 4,660 59,550

123 Medical Savings Accounts / Health Savings Accounts 5,330 4,540 57,540

129 Tax credit for orphan drug research 1,720 2,080 55,260

97 Qualified tuition programs (includes Education IRA) 2,420 2,670 55,020

15 Energy production credit 1/ 5,020 5,280 53,380

94 Exclusion of scholarship and fellowship income (normal tax method) 3,510 3,660 52,960

69 Carryover basis of capital gains on gifts 2,610 3,050 44,550

71 Deferral of gains from like-kind exchanges 3,030 3,200 40,090

145 Premiums on group term life insurance 2,160 2,990 38,440

125 Exclusion of interest on hospital construction bonds 2,730 3,250 37,460

114 Credit for child and dependent care expenses 3,190 3,080 36,700

72 Depreciation of buildings other than rental housing (normal tax method) 6,010 4,090 33,110

99 Exclusion of interest on bonds for private nonprofit educational facilities 1,910 2,280 26,210

96 Deductibility of student-loan interest 2,170 2,030 25,170

48 Exemption of credit union income 2,140 2,080 24,564

52 Exclusion of interest spread of financial institutions 4,230 3,110 24,470

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

FISCAL YEAR 2021-2030 PROJECTED REVENUE EFFECT
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

(in millions of dollars)

Provision 2020 2021 2021-30

102 Parental personal exemption for students age 19 or over 0 0 24,110

80 Exclusion of reimbursed employee parking expenses 1,686 1,759 22,153

159 Exclusion of GI bill benefits 1,460 1,580 19,600

67 Capital gains exclusion of small corporation stock 1,410 1,530 19,540

6 Interest Charge Domestic International Sales Corporations (IC-DISCs) 890 1,370 19,420

156 Credit for certain employer contributions to social security 720 990 17,070

44 Capital gains treatment of certain agriculture income 1,330 1,340 17,020

57 Deferral of income from installment sales 1,480 1,470 16,620

54 Exclusion of interest on rental housing bonds 1,200 1,430 16,470

104 Exclusion of employer-provided educational assistance 1,190 1,390 16,450

153 Earned income tax credit 16/ 2,660 700 15,300

148 Income of trusts to finance voluntary employee benefits associations 1,090 1,070 13,870

143 Low and moderate income savers credit 1,220 1,220 13,360

118 Exclusion of parsonage allowances 900 950 12,130

108 Work opportunity tax credit 1,650 1,690 11,820

88 New markets tax credit 1,280 1,290 10,710

14 Enhanced oil recovery credit 470 500 10,190

154 Recovery rebate credits 17/ 0 9,110 10,122

39 Carbon oxide sequestration credit 14 123 9,908

85 Exclusion of interest for airport, dock, and similar bonds 720 850 9,860

53 Exclusion of interest on owner-occupied mortgage subsidy bonds 710 850 9,760

10 Excess of percentage over cost depletion, fuels 590 600 9,230

112 Adoption credit and exclusion 770 790 9,080

38 Tax incentives for preservation of historic structures 660 610 8,870

111 Assistance for adopted foster children 620 660 8,870

109 Employer provided child care exclusion 580 570 8,640

164 Deferral of interest on U.S. savings bonds 910 840 8,000

137 Exclusion of public assistance benefits (normal tax method) 580 600 6,760

28 Credit for residential energy efficient property 2,370 2,390 6,360

132 Distributions from retirement plans for premiums for health and long-term care insurance 430 450 5,570

117 Exclusion of certain foster care payments 490 510 5,370

81 Exclusion for employer-provided transit passes 341 363 5,250

152 Deductibility of casualty losses 0 0 4,641

42 Expensing of certain multiperiod production costs 560 370 4,590

107 Qualified school construction bonds 9/ 570 540 4,270

35 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 270 330 3,750

51 Tax exemption of insurance income earned by tax-exempt organizations 320 320 3,600

9 Expensing of exploration and development costs, fuels 40 -40 3,510

3 Exclusion of certain allowances for Federal employees abroad 270 280 3,500

146 Premiums on accident and disability insurance 330 340 3,470

20 Tax credits for clean-fuel burning vehicles and refueling property 570 440 3,400

130 Special Blue Cross/Blue Shield tax benefits 140 190 3,270

158 Exclusion of veterans pensions 210 220 2,350

149 Special ESOP rules 210 210 2,330

135 Exclusion of railroad retirement (Social Security equivalent) benefits 310 290 2,180

45 Income averaging for farmers 170 180 2,160

41 Expensing of certain capital outlays 80 120 2,030

31 Advanced nuclear power production credit 0 0 2,000

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

FISCAL YEAR 2021-2030 PROJECTED REVENUE EFFECT
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

(in millions of dollars)

Provision 2020 2021 2021-30

26 Credit for construction of new energy efficient homes 320 370 1,940

139 Exclusion of military disability pensions 160 160 1,920

98 Exclusion of interest on student-loan bonds 140 160 1,910

105 Special deduction for teacher expenses 170 170 1,880

36 Capital gains treatment of certain timber income 130 130 1,700

34 Excess of percentage over cost depletion, nonfuel minerals 110 100 1,620

106 Discharge of student loan indebtedness 80 80 1,470

78 Tonnage tax 140 140 1,400

50 Exemption or special alternative tax for small property and casualty insurance companies 110 120 1,370

16 Marginal wells credit 150 250 1,340

32 Reduced tax rate for nuclear decommissioning funds 100 110 1,320

83 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities 170 160 1,300

25 Allowance of deduction for certain energy efficient commercial building property 160 190 1,200

86 Exemption of certain mutuals' and cooperatives' income 90 90 1,030

24 Amortize all geological and geophysical expenditures over 2 years 80 80 1,020

75 Exclusion of interest on small issue bonds 80 90 1,010

160 Exclusion of interest on veterans housing bonds 70 80 920

89 Credit to holders of Gulf Tax Credit Bonds. 100 110 870

64 Exceptions from imputed interest rules 60 60 810

70 Ordinary income treatment of loss from small business corporation stock sale 70 70 800

87 Empowerment zones 160 130 770

90 Recovery Zone Bonds 6/ 90 90 760

37 Expensing of multiperiod timber growing costs 50 60 740

47 Expensing of reforestation expenditures 50 60 740

82 Tax credit for certain expenditures for maintaining railroad tracks 140 170 740

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

93 Employee retention credit 230 160 700

100 Credit for holders of zone academy bonds 8/ 150 130 690

133 Credit for family and sick leave taken by self-employed individuals 14/ 500 590 680

43 Treatment of loans forgiven for solvent farmers 50 50 640

12 Capital gains treatment of royalties on coal 100 70 590

40 Deduction for endangered species recovery expenditures 30 30 460

101 Exclusion of interest on savings bonds redeemed to finance educational expenses 30 40 450

150 Additional deduction for the blind 30 40 440

21 Exclusion of utility conservation subsidies 60 60 420

147 Income of trusts to finance supplementary unemployment benefits 20 10 370

27 Credit for energy efficiency improvements to existing homes 240 240 360

33 Expensing of exploration and development costs, nonfuel minerals 0 0 340

29 Qualified energy conservation bonds 5/ 30 30 300

119 Indian employment credit 70 70 290

23 Credit for investment in clean coal facilities 30 30 280

63 Discharge of business indebtedness 40 30 280

110 Employer-provided child care credit 20 20 220

11 Exception from passive loss limitation for working interests in oil and gas properties 20 20 190

46 Deferral of gain on sale of farm refiners 15 15 180

138 Exclusion of special benefits for disabled coal miners 20 30 180

13 Exclusion of interest on energy facility bonds 0 10 100

19 Bio-Diesel and small agri-biodiesel producer tax credits 3/ 30 40 100

30 Advanced Energy Property Credit 10 10 100

79 Deferral of tax on shipping companies 10 10 100

91 Tribal Economic Development Bonds 10 10 100

115 Credit for disabled access expenditures 10 10 100

127 Credit for employee health insurance expenses of small business 12/ 40 40 90

120 Credit for employer differential wage payments 0 0 70

18 Alcohol fuel credits 2/ 0 10 10

84 Investment credit for rehabilitation of structures (other than historic) 10 0 0

131 Tax credit for health insurance purchased by certain displaced and retired individuals 13/ 0 0 0

162 Build America Bonds 18/ 0 0 0

76 Special rules for certain film and TV production -190 -50 -930

92 Opportunity Zones 3,770 2,680 -1,670

73 Accelerated depreciation of machinery and equipment (normal tax method) 32,800 31,320 -66,720

7 Expensing of research and experimentation expenditures (normal tax method) 5,420 3,980 -82,240

See Table 1 footnotes for specific table information

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

FISCAL YEAR 2021-2030 PROJECTED REVENUE EFFECT
 U.S. Department of the Treasury

 Office of Tax Analysis

 June 3, 2021

2020

Provision Present Value

of Revenue Loss

7 Expensing of research and experimentation expenditures (normal tax method) 740

22 Credit for holding clean renewable energy bonds 0

9 Expensing of exploration and development costs - fuels 140

33 Expensing of exploration and development costs - nonfuels 10

37 Expensing of multiperiod timber growing costs 60

42 Expensing of certain multiperiod production costs - agriculture -260

41 Expensing of certain capital outlays - agriculture -110

47 Expensing of reforestation expenditures 20

62 Accelerated depreciation on rental housing -4,860

72 Depreciation of buildings other than rental -1,250

73 Accelerated depreciation of machinery and equipment -23,620

74 Expensing of certain small investments (normal tax method) 0

100 Credit for holders of zone academy bonds 0

61 Credit for low-income housing investments 8,680

97 Qualified tuition programs 5,720

140 Defined benefit employer plans 46,030

141 Defined contribution employer plans 120,610

142 Exclusion of IRA contributions and earnings 2,870

142 Exclusion of Roth earnings and distributions 6,620

142 Exclusion of non-deductible IRA earnings 790

144 Exclusion of contributions and earnings for Self-Employed plans 7,630

162 Exclusion of interest on public-purpose bonds 11,140

Exclusion of interest on non-public purpose bonds 1/ 4,450

165 Deferral of interest on U.S. savings bonds 70

1/

Table 4. PRESENT VALUE OF SELECTED TAX EXPENDITURES

FOR ACTIVITY IN CALENDAR YEAR 2020

(in millions of dollars)

Includes all components, other than public purpose, listed under ‘Exclusion of interest on State and local bonds’ in the 

Addendum to Table 1.