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.

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 ?
The law provides a one-time refundable tax credit of $7,500 or 10 percent of the home's purchase price, whichever is less, for qualifying homes purchased April 9, 2008, through June 30, 2009.
Such statements include the statements regarding the Company's expectations, hopes or intentions regarding the future, including, but not limited to, expectations or statements related to the Company's ability to make labor credit claims or receive any such labor credits under the eligibility certificate from Investment Quebec for the Investment Quebec Refundable Tax Credit for Major Employment Generating Projects (GPCE) or maintain eligibility under such program and statements regarding our future commitment to our Montreal operations.
Refundable tax credit for total qualified spending on film, TV, digital media and commercials on Oahu
Last year, an additional $16 billion to $19 billion was estimated to have been improperly paid to those claiming the Earned Income Tax Credit a refundable tax credit designed to help low- to moderate-income taxpayers.
The Earned Income Tax Credit (EITC) is a refundable tax credit that reduces or eliminates the taxes that low-income working people pay.
But BEA did not break out refundable tax credit statistics.
With Alabama now offering a refundable tax credit of up to 25% of production expenditures, plus 35% of payroll to state residents, the tide has shifted, and filmmakers have poured in to avail themselves not only of the new breaks, but also the green landscapes, sandy beaches and right-to-work laws.
The legislation, passed Wednesday by a 48-1 vote, will allow a 5% refundable tax credit to film and television companies in addition to the 10% tax credit qualified productions can already garner from New York State.
In Ohio, filmmakers can reap the benefits of a 25% refundable tax credit for qualified expenditures, with resident labor expenses recoupable at 35%.
The state offers a refundable tax credit of up to 25% of qualified expenditures, an ample crew base, multiple film offices--and each January hosts one of the world's major film festivals in Park City.
It also offers another lure--a refundable tax credit of up to 27% of qualified spend for television series, per EP.