Federal Tax Course – Lesson 18
|What is a Tax Credit||1802|
|The Credit for The Elderly and Permanently Disabled|
|How the Credit is Computed||1804|
|The Earned Income Credit|
|Nature of the Credit||1807|
|Who is Eligible||1808|
|The Child and Dependent Care Credit|
|Introduction – What Expenses Qualify||1809|
|How the Credit is Computed||1810|
|The Adoption Credit and Exclusion||1811|
|The Foreign Tax Credit||1812|
|The Child Credit||1813|
|The Higher Education Credits|
|Lifetime Learning Credit||1816|
|Choosing Which Credit to Claim||1817|
|The Income Phaseout||1818|
|The General Business Credit|
|The Investment Credit||1820|
|The Increased Research Credit||1821|
|The Work Opportunity Credit||1822|
|The Welfare to Work Credit||1823|
|The Low Income Housing Credit||1824|
|Credit for FICA Tax Paid on Tip Income||1825|
|The Disabled Access Credit||1826|
|The Empowerment Zone Employment Credit||1827|
|The Indian Employment Credit||1828|
|Limits on the General Business Credit||1829|
|Credits for Overpayments||1830|
What is a Tax Credit?
A taxpayer entitled to a tax credit is considered to have paid that amount towards his tax liability. In other words, each dollar of credit reduces the tax by one dollar.
It is most important to note the distinction between a tax deduction and a tax credit. A tax deduction is subtracted from income (gross income or adjusted gross income, as the case may be) in computing the taxable income on which the tax is figured. A tax credit, on the other hand, is deducted from the tax after it has been computed. Obviously, a tax credit is much more valuable than a tax deduction; a taxpayer in the 28% tax bracket, for instance, saves approximately 28 cents for each dollar of deductions, while he saves one dollar in taxes for each dollar of credit.
Each credit, generally, must be claimed on a specific form, which is attached to the income tax return for the year.
This assignment will acquaint you with the various tax credits provided by law.
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