On December 3, the Joint Committee on Tax (JCT) released its annual “tax expenditure report.” The report lists tax code provisions that lessen (or decrease) tax revenue paid to the federal government because they are departures from the usual rule, which is the foundation of the current income tax scheme, that all income is subject to tax.
As is usual, the list of tax expenditures contains dozens of provisions that impact life and health insurance, annuities, retirement savings, employer-provided benefits, financial planning/investment, and the taxation of business income. The list below shows just how pervasive tax rules are for those in the financial services and insurance industry.
This tax expenditure list covers fiscal years 2025 through 2029.
| Life Insurance death benefits/cash values: | $102.1 billion |
| Employer-provided health/long-term care insurance | $1,268.2 trillion |
| Self-employed health/long-term care insurance | $54.5 billion |
| Retirement savings | |
| Keogh Plans | $91.1 billion |
| Defined Benefit Plans | $758.2 billion |
| Defined Contribution Plans | $1.220.3 trillion |
| Traditional IRAs | $105.4 billion |
| Roth IRAs | $86.2 billion |
| Lower tax rate for long-term dividends, capital gain | $1.253.0 trillion |
| Exclusion of capital gains at death (step-up in basis) | $379.3 billion |
| Carryover basis for gifted property at death | $68.1 billion |
| Qualified business income deduction (pass-through’s) | $389.9 billion |
| Health Savings Accounts | $82.3 billion |
| Group term life insurance | $28.1 billion |
| Accident and disability income insurance | $82.3 billion |
| Deduction for health and long-term care expenses | $73.9 billion |
| Trump Accounts | $144.0 billion |
| 529 plans (pre-paid tuition and savings plans) | $29.0 billion |
| ESOPs | $51.1 billion |
| VEBAs | $158.0 billion |
| Child and dependent care tax credit | $32.8 billion |
| Child and dependent care expenses | $32.8 billion |
| Limit on deductible compensation—increases revenue | $ +35.8 billion |
| Expensing of depreciable business property | $646.9 billion |
| Surtax on net investment income—increases revenue | $ +389.8 billion |
| Life insurance company reserves | $13.1 billion |
| Like-kind exchanges | $53.6 billion |
| Family and Medical Leave | $2.2 billion |
| Deduction for qualified overtime | $89.6 billion |
| Enhanced deduction for seniors | $90.8 billion |
But it is important to note that the list is not all-inclusive. For example, no estate and gift tax or trust rules are included in this list, largely because JCT does not consider trusts, estates and gifts “income” for purposes of the tax expenditure report.
The tax expenditure report is something tax writers look at closely when it comes time to pay for (offset the cost of) new tax benefits or to reduce the federal deficit. It is, therefore, key to understanding the risk faced by NAIFA when Congress crafts new tax legislation.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org