Tax Policy – Tax Expenditures

Every year, the Joint Committee on Taxation (JCT) prepares a report on the cost of tax expenditures (the costs of the tax breaks provided in the IRC).  The estimated cost of each tax expenditure item is computed on a yearly (fiscal) basis and then summarized for a five-year period.

The most recent report was published by the JCT on February 1, 2013.  The first part of the report provides great background information on tax expenditures and how the JCT computes and prepares the report.  The heart of the report is the detailed Table 1 listing all the expenditures and their annual fiscal year estimated costs.  Table 1 starts at page 30 in the attached pdf of the report (below).

For selected individual income tax tax expenditures, the distribution of the tax expenditure is shown by income category.  These computations are contained in Table 3, which starts on page 43 of the report.

In an earlier post, an article on the home mortgage interest expense deduction being discussed as a potential target in tax reform was linked.  In the attached JCT report, on page 33 the estimated 2013 tax expenditure cost of this deduction (“Deduction for mortgage interest on owner-occupied residences”) is $68.5 billion.  Moving forward to page 48, the total tax expenditure cost of the benefit calculated based upon 2012 income amounts and 2012 tax rates (slightly different from the fiscal year amount indicated above) was reflected to be $68.166 billion.  Of this total amount, $29.068 billion (42.64%) was calculated as benefiting taxpayers with $100,000 to $200,000 of income, and $23.606 billion (34.63%) was calculated as benefiting taxpayers with $200,000 and over of income.

ESTIMATES OF FEDERAL TAX EXPENDITURES FOR FISCAL YEARS 2012-2017

 s-1-13 JCT Tax Expenditures

About Title26

I am a CPA with a MST. I was in public practice for 29 years, during which time I assisted a broad variety of tax clients. I am now an adjunct income tax instructor teaching undergraduate & graduate tax classes. I enjoy tax and tax policy.
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