tax credit

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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

tax credit

see CORPORATION TAX, DIVIDEND.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

tax credit

see NEGATIVE INCOME TAX.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
The first $2,000 of qualified educational expenses incurred can be taken as a credit against tax, dollar for dollar.
The taxpayer carries forward the AMT paid as a credit against tax in subsequent years, to the extent the regular tax liability exceeds the tentative minimum tax (TMT).
671 provides the general rule that, when a grantor or another person is treated as the owner of any portion of a trust, there will be included in computing the taxable income and credits of the grantor or other person those items of income, deduction and credit against tax of the trust attributable to that portion of the mast, to the extent that such items would be taken into account in computing taxable income or credits against an individual's tax.
The taxes paid on business income in Lane County will be used as credit against taxes collected on personal income.
Those higher up the income scale would get a dollar-for-dollar credit against taxes owed; a family making $40,000 would get back around $1,000.
Treaty terms allow you to claim a credit against taxes already paid to the U.S., but you must pay the higher of the two taxes.

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