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Employer-paid health insurance is largest tax break

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in Compensation and Benefits,Human Resources

As the legislative wrangling to avert a plunge over the federal budget’s fiscal cliff heated up late last year, the IRS released its list of the nation’s biggest tax breaks. Three of the top 10 involved employee benefits.

The largest by far is the exclusion from employee in­­come of the value of employer-provided health insurance coverage, worth $173.7 billion in 2011. That’s almost twice as much as the second largest: the mortgage-interest tax deduction, which is valued at $88.8 billion per year.

Tax deferrals on 401(k) plan investments came in third overall, at $62.9 billion. Income exclusions for retirement plans other than 401(k)s accounted for the ninth largest tax break, worth $42.2 billion.

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