Tax incentive is optional but highly important element of taxation, used in order to achieve different goals. On the one hand, tax incentives form tax expenditures and thus reduce budget revenue; on the other hand, they influence behavior of persons and businesses and may have positive or negative social and economic effect. This article analyzes the incentives of personal taxation in Lithuania and their social, economic and fiscal impact. The study was conducted using the method of descriptive and factor analysis. The results revealed economic impact of tax incentives applicable in Lithuania.