Part of the debate over how to avert the fiscal cliff focuses on the possibility of reining in certain tax loopholes and deductions.
The number of deductions, or tax breaks, has nearly doubled since the last significant overhaul of the tax code more than a quarter-century ago. A host of tax benefits have been added for children, college tuition, retirement savings, hiring and the families of victims of terrorist attacks, among others.
As the number of breaks has increased, so has the value of some of the most popular deductions, including breaks for mortgage interest and the tax-free treatment of health insurance premiums paid by employers.
How many tax breaks are there? It depends on whom you ask. The congressional Joint Committee on Taxation counts more than 300; the Treasury Department counts more than 170. Only about 8 percent of tax benefits go to corporations, on average, with most enjoyed by middle-class households.
Here’s a quick look at the 10 most popular breaks for individuals from 2011:
1. Exclusion of employer contributions for medical insurance premiums and medical care: Worth $173.7 billion in 2011
2. Mortgage interest deduction: $88.8 billion
3. 401(k) plans: $62.9 billion
4. Earned-income tax credit: $62.5 billion
5. Step-up basis of capital gains at death: $50.9 billion
6. Exclusion of net imputed rental income (a break for homeowners): $47 billion
7. Making Work Pay tax credit: $44 billion
8. Child credit: $42.5 billion
9. Employer plans (retirement plans other than 401(k)s): $42.2 billion
10. Deductibility of charitable contributions, other than education and health: $38.2 billion