No one wants to pay more in income tax than they have to, so taking advantage of legal tax breaks is always a smart move. But what many Americans don't realize is how much those tax breaks cost the government in lost revenue.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, runs through the three tax breaks that have the greatest impact on the federal budget. Dan points out that the most expensive is tax-free employer-provided health insurance, which not only saves Americans almost a quarter-trillion dollars in taxes every year but also helps boost business prospects for UnitedHealth Group (NYSE:UNH) and other insurance companies. Dan goes on to discuss the impact of lower rates on long-term capital gains and dividend stocks, which costs the government $161 billion every year, and then concludes with a look at the tax deferral of pension contributions and earnings. Dan concludes with a look at how investing in Annaly Capital (NYSE:NLY), American Capital Agency (NASDAQ:AGNC), and similar high-dividend stocks can help you make the most of the tax break that U.S. tax law gives you for your retirement accounts.