tax credit

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Related to Tax credits: Child Tax Credits

Tax credit

A direct dollar-for-dollar reduction in tax allowed for expenses such as child care and R&D for building low-income housing. Compare tax deduction.

Tax Credit

A direct, dollar-for-dollar reduction of one's tax liability. That is, if a taxpayer otherwise owes $2,000 to the government in income tax, but has $1,000 in tax credits, then the taxpayer only owes $1,000. Tax credits may be either refundable or non-refundable. A refundable tax credit means that if one's tax liability goes below zero, the government owes the taxpayer the remainder of the credit. Non-refundable credits mean that the tax liability cannot go below zero. Relatively few tax credits are refundable; most are limited to the amount of one's tax liability. However, the earned income tax credit is a common example of a refundable credit.

tax credit

A reduction in the amount of taxes owed. For example, corporations are permitted a credit on U.S. taxes for taxes paid to foreign governments, and individuals could, for a number of years, claim a tax credit for a portion of expenditures for certain energy-saving home improvements. A tax credit is more valuable than a deduction of an equal amount because the credit results in a reduction in tax owed rather than a reduction in taxable income. See also foreign tax credit.

Tax credit.

A tax credit is an amount you can subtract from the tax you would otherwise owe. Unlike a deduction or exemption, a credit is a dollar-for-dollar reduction of your tax bill.

For example, if you pay someone to care for your young children or for elderly or disabled relatives, you may be able to subtract that money, up to a set limit.

Among the other tax credits for which you may qualify are the Hope scholarship and lifetime learning education credits, a credit for purchasing a hybrid car, or a credit for adopting a child. The list changes from time to time.

Some but not all credits are available to people whose income is less than the ceilings Congress sets. Other credits are available to anyone who has spent the money.

tax credit

see CORPORATION TAX, DIVIDEND.

tax credit

see NEGATIVE INCOME TAX.

tax credit

A direct reduction against income tax liability. Credits reduce taxes dollar-for-dollar. Common tax credits include

1. Earned income credit, used to assist low-income taxpayers.
2. Saver's tax credit, for contributions to qualified retirement plans by low-income individuals.
3. Child-related credits for child- and dependent-care expenses, adoption expenses, and the child tax credit.
4. Education credits, particularly the Hope credit and the lifetime learning credit.
5. Credits for the elderly or disabled.
6. Mortgage credit certificate programs by some state and local governments may be used for tax credits on federal income taxes. 7. Work opportunity credits (for businesses).
8. Rehabilitation credits.

Contrast with a tax deduction, which merely reduces income on which taxes are calculated.

References in periodicals archive ?
113) For example, Colorado imposes a $50,000 limit on tax credits that may be awarded to a single commercial project.
124) Banks and brokers are typically the initial purchasers of these tax credits, and they subsequently sell the tax credits to other taxpayers looking to reduce their tax liability.
As one of the leading syndicators of historic tax credit transactions, no equity investment is too large.
The Northeast Valley Enterprise Zone was created in 1986 and redrawn in 1994, after then-President Clinton refused to designate it one of the nation's empowerment zones, which would have provided direct investments in addition to tax credits.
It provides tax credits of up to $31,234 for new jobs, tax credits of up to $20 million on machinery, preferences on state contracts and other tax benefits.
Child Tax Credit and Working Tax Credit schemes were introduced by the government in April 2003 to introduce benefits through the tax system.
The financial underpinnings of an increasingly critical segment of America's housing market is the focus of "Housing Tax Credit Investments: High Performance and Increased Need" released by accounting, tax and advisory firm CohnReznick.
The tax credits help to encourage companies to rehabilitate and
Any time taxpayers can qualify for tax credits bigger than their tax obligations, and get the refund cash directly, without the cash being segregated, "it's a magnet," Koskinen said.
8 million in tax credits to Precision Garments International in 1998 even though it submitted spurious documents which allowed the company to sell its tax credit to Steel Asia Manufacturing Corp.
The tax credit may be paid in advance by the federal government directly to health plans and health insurers on a monthly basis, starting at the point of enrollment.
Several types of production tax credits are available.