Follow the lines of the IRS Form 1040, and a picture emerges of an America divided economically by race and ethnicity.

Although high-income Americans pay a larger share of their income in taxes, they nonetheless have a significant financial advantage over African Americans, Hispanics and low-income families, according to a newly released analysis by the nonpartisan Tax Policy Center.

Researchers for the center took a line-by-line look at the 1040 form for individuals in an effort to answer this question: Is the tax code neutral on race?

It’s not.

There’s definitely a bias that exacerbates income and wealth inequalities, says Kim Rueben, Sol Price fellow at the Tax Policy Center.

“Even though the IRS doesn’t ask about race, this doesn’t mean that the 1040 or the federal income tax system doesn’t have different effects for people of different races,” Rueben said in an interview. (You can access the guide here:

In their interactive guide through the 1040 form, Rueben and research analyst Aravind Boddupalli explain various ways in which the tax code contributes to racial inequities.

For example, in 2018, the treatment of capital gains overwhelming benefited wealthier white families. Tax breaks for retirement savers and homeowners contribute to the wealth divide and also disproportionately go to high-income white taxpayers.

Workplace retirement plans — such as a 401(k) — have helped a lot of people accumulate wealth. But African American and Hispanic workers are less likely to have access to this tax-favorable benefit.

Employer plans boost participation in retirement savings. It’s easier to save when the money is coming out of your paycheck before you see it. If an employer matches employee contributions, plan participation increases by 15 to 15.5 percentage points, according to research by the Pew Charitable Trusts.

“Americans do most of their saving for retirement at their jobs,” the Pew Research Center said in a 2017 report on retirement access and participation.

The problem is many private-sector workers of color don’t have access to employer-sponsored plans. In 2016, 60 percent of white families had retirement accounts, compared with 34 percent of black families and 30 percent of Hispanic families, according to the Federal Reserve Survey of Consumer Finances.

It’s been a long-standing policy of the federal government to encourage homeownership. And the mortgage-interest tax deduction is one way to boost this mission. A married couple filing jointly can deduct mortgage interest on up to $750,000 for a qualified residential loan.

Taxpayers can also exclude capital gains from the sale of a home. Up to $250,000 (or $500,000 for married couples) of capital gains from the sale of principal residences can be tax-free if taxpayers meet certain conditions.

But who benefits most from these two tax provisions?

It’s largely white households, because they have a higher rate of homeownership at 73.4 percent, according to the most recent data from the Census Bureau. In the third quarter of 2019, the average homeownership rate was 42.7 percent for blacks and 47.8 percent for Hispanics.

“We are not suggesting that the Internal Revenue Service or the federal government is targeting tax provisions to benefit or harm people of color,” wrote Rueben and Boddupalli in a note about the project. “Overall, our goal is to illustrate how the tax system and specific tax provisions may have disparate impacts by race or ethnicity.”

There are a number of reasons to explain the disparity, but much of it can still be traced to a history of redlining and segregation, Rueben told me.

“If we think about homeownership and retirement savings, two of the characteristics of those programs are to encourage people to build wealth through our tax system,” she said. “And the fact that black and brown families are not benefiting from them means they’re not accessing some of the ways that people largely build their wealth over time.”

Rueben said one way to encourage homeownership among low-income and minorities would be to create a credit for first-time home buyers instead of giving a deduction for mortgage interest, which has the effect of benefiting borrowers buying bigger homes.

There are parts of the tax code — such as the earned-income tax credit (EITC) — that greatly benefit low- and modest-income black and Hispanic households. But as the Tax Policy Center’s research shows, the system overall still skews in favor of those who are more well off.

As Rueben points out, we do a lot of our public policy through our tax system. The launch of this new interactive tool is an important analysis designed not to cast blame, but to highlight those areas of the tax code that need an update. It’s past time to correct provisions that continue to deepen our nation’s wealth divide.

Have a question about retirement or personal finance? Join Michelle for an online Q&A every Thursday at noon Eastern time. Readers may write to Michelle Singletary at The Washington Post, 1301 K St. NW, Washington, D.C. 20071 or To read previous Color of Money columns, go to