Savings leads to capital formation and thus makes funds available to finance home construction and industrial expansion. What is a major tax law incentive to encourage savings? Preferential treatment of private retirement plans encourages saving. Not only are contributions tax deferred, but income from these contributions accumulates on a tax-free basis.

Tax incentives provided to individual retirement accounts (IRA)

Explanation:

IRAs are a form of private individual retirement plans and they provide tax advantages for retirement savings. Most IRAs provide tax deferrals meaning that they can be deducted from gross income, and they are taxed once only when distributed. While Roth IRAs don't provide tax deferrals but the distributions are tax free.