tax credit


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Related to tax credit: Child tax credit, Investment tax credit

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 ?
Income eligibility for the premium tax credits will be based on the previous year's income tax returns.
Tempus will not only take advantage of our turn-key technology solutions and improve the dynamics in which they facilitate tax credit transactions on behalf of its customers, but they will also bring new tax credit product specialties to our network of professionals who are engaged in all aspects of tax credits.
They are also required to take 10 hours of housing tax credit education.
Tax credits can be paid in addition to most other benefits but they can count as income for some means-tested benefits.
California Enterprise Zone (EZ) programs offer substantial tax credits and deductions to businesses located within any of 42 EZ regions, representing roughly 12 percent of the state (www.
Several justices, for example, voiced difficulty finding any discriminatory harm from a state tax credit equally available to in-state or out-of-state businesses.
But Christine Kaszycki, Ontario's assistant deputy minister of mines and minerals, reassures junior miners and residents that the current provincial program for flow-through tax credits will continue in its present form.
a review of tax credits for businesses to encourage employment of persons with disabilities and, in particular, similar to that offered in the United States.
There was no dispute that the Ohio investment tax credit and property tax abatement satisfied the first, second and fourth prongs.
While a tax credit can make insurance policies more affordable, the real benefit, says Park, would lie in market reforms associated with the credit.
The Hope Scholarship Tax Credit is a good deal for couples who earn under $80,000 a year.