A tax credit is a tax incentive that allows certain taxpayers to reduce the amount of credit they make from total state debt. It may also be credit given in recognition of tax already paid or, as in England, a form of state support.
Video Tax credit
Credit for payment
Many systems refer to indirect taxes, such as taxes withheld by payers, as credit rather than prepayment. In such cases, the tax credit is always refundable. The most common forms of this amount are income tax deduction or PAYE, tax deductions at source on payments to non-residents, and input credits for value added tax.
Maps Tax credit
Personal income tax credit
The income tax system often provides various credits to individuals. This usually includes credits available to all taxpayers as well as a unique tax credit to individuals. Some credits may be offered for one year only.
Low-income subsidies
Some income tax systems provide income subsidies to low-income individuals by means of credit. This credit may be based on income, family status, employment status, or other factors. Often such credits can be refunded when the total credit exceeds the tax liability.
United Kingdom
In the United Kingdom, Child Tax Credit and Working Tax Credit are paid directly to the claimant's bank account or the Post Office Card Account. Under exceptional circumstances, this can be paid by cashcheque (sometimes called a checkbox) but payment may cease if account details are not provided. The minimum level of Child Tax Credit is paid to all individuals or couples with children, up to a certain income limit. The actual amount of Child Tax Credits that a person may receive depends on these factors: their income level, the number of children they have, whether the children receive a Disability Life Allowance and educational status of children over 16 years.
Working Tax Credit is paid to low-income single with or without children aged 25 or over and working more than 30 hours per week and also for spouses without children, at least one of whom is over 25 years of age, provided that at least one of them work for 30 hours a week. If the plaintiff has children they can claim Working Tax Credits from age 16 upwards provided they work at least sixteen hours per week.
Tax Credits are closed where many sources claim to affect the poorest families disproportionately. A survey by End Child Poverty estimates that about 1.5 million parents have reduced spending on basic things like food and fuel. According to Gavin Kelly of the Resolution Foundation, tax credits help improve the living standards of low-income workers. He wrote in New Statesman, "Perhaps the biggest misconception is the voguish idea that if the tax credit is cut, the entrepreneur will somehow decide to offer a raise to fill the gap.This is a saloon-bar economy shared by some in left and right. "
On September 15, 2015, the House of Commons voted to reduce the Limit of Tax Credits, a law that came into effect on April 6, 2016. Opponents claimed that it would harm those on low incomes. Simon Hopkins, Chief Executive Officer of Turn2us commented "Today's voting in the House of Commons will mean one thing for many of the poorest working families in the UK they will become poorer." Tax credits are an important source of income for those low wages and for many is a big part of their monthly income.
IFS supports the opposition's view that the effects of change will disproportionately reduce the income of poor families, even taking into consideration the reduction of income tax and the increase in the National Living Wage. The government responded that the tax credit system had been spent for too long to subsidize low payments and the change would bring total spending for tax credits back to the more sustainable levels seen in 2007-08.
On October 26, 2015 House of Lords endorsed a motion from Baroness Meacher postponing the imposition of withholding until a new consideration of the effect can be made by the House of Commons.
United States
The US system provides the following low income tax credit:
- Income credits earned: these refundable credits are granted for the percentage of income earned by low-income individuals. Credits are calculated and limited by the number of eligible children, if any. These credits are indexed for inflation and are removed for earnings above a certain amount. For 2016, the maximum credit is $ 6,269 for taxpayers with three or more eligible children.
- Credits for the elderly and persons with disabilities: non-refundable credit up to $ 1,125.
- Loans for pension savings contributions: non-refundable creditable credits up to 50% for contributions up to $ 2,000 for eligible retirement savings packages, such as IRAs (including Roth, SEP and IRA), 401 (k)/403 (b)/457 Saving Plans and Plans; starts gradually (for fiscal year 2014) with earnings over $ 18,000 for single refunds, $ 27,000 for heads of households, and $ 36,000 for joint returns.
- Mortgage interest credits: non-refundable credits that can be limited to $ 2,000, which are granted under a special mortgage program.
- Premium tax credits: these refundable credits are granted to individuals and families who are covered by health insurance policies through exchange of health services, and whose income falls between 100% and 400% of the applicable federal poverty line. It was first introduced in fiscal year 2014.
Family help
Some systems provide tax credits for families with children. This credit may be granted per child or as a credit for the cost of child care.
The US system offers a non-refundable family income tax credit and its taxes (other than tax deductions for each dependent child):
- Child credit: Parents of children under the age of 17 at the end of the tax year may be eligible for credit up to $ 1,000 per eligible child. The credit is a reduction in the dollar-for-dollar tax obligation, and may be listed on Line 51 of Form 1040. For each $ 1,000 of adjusted gross income above the threshold ($ 110,000 for married reporting together; $ 75,000 for a single reporter) , the amount of credit decreased to $ 50.
- Child care credits and dependents: If the taxpayer has to pay for childcare for a child under the age of 13 to pursue or maintain a profitable job, he or she may claim credit up to $ 3,000 of his eligible expenses for dependent care. If one parent stays home, however, no childcare costs are eligible for credit.
- Credit for adoption fee: credit up to $ 10,000, deleted with higher earnings. A taxpayer who has incurred a qualified adoption fee in 2011 can claim either a $ 13,360 credit toward tax payable or $ 13,360 if the taxpayer has received payment or reimbursement from his employer for the cost of adoption. For 2012, the amount of credit will fall to $ 12,650, and in 2013 to $ 5,000.
- Family tax credit is a payment for each dependent child 18 years or younger
Education, energy and other subsidies
Some systems indirectly subsidize education and similar fees through tax credits.
The US system has the following non-refundable credits:
- Two mutually exclusive credits for qualified tuition fees and related costs. The American Opportunity Tax Credit is 100% of the first $ 2,000 and 25% of the next $ 4000 of eligible tuition fees per year for two years. Lifelong Learning Credits are 20% of $ 10,000 of first cumulative costs. This credit was removed on earnings above $ 50,000 ($ 100,000 for a joint refund) in 2009. Expenditures on loans claimed to be ineligible for tax deductions.
- First the home buyer gets a credit of up to $ 7,500 (closing date before September 30, 2010).
- Credit for the purchase of certain non-business energy properties and energy efficiency of housing. Some credits apply with different rules.
Business tax credits
Many systems offer incentives for businesses to invest in properties or operate in certain areas. Credits may be offered against income or property taxes, and are generally non-refundable as long as they exceed taxes or maturities. Credits can be offered to individuals and entities. The nature of available credit varies greatly according to jurisdiction.
United States
The US income tax has many non-refundable business credits. In many cases, any credit amount that exceeds the current year's taxes may be charged forward to compensate for future taxes, with limitations. Credits include the following (for a complete list, see section 38 of the Internal Revenue Code):
- Alternative auto loans: some credits are available for the purchase of various types of non-gasoline-powered vehicles.
- Alternative fuel credit: credits based on the amount of production of certain non-oil fuels.
- Disaster help credits
- Credits to hire individuals in certain areas or prior to welfare or within targeted groups
- Credits to increase your research costs
- Various industry-specific credits
Many sub-Federal jurisdictions (states, cities, etc.) in the US offer income or property tax credits for certain activities or expenses. Examples include credits similar to Federal research and labor credits, property tax credits, (often called abatement), granted by cities for building facilities within the city, etc. These items are often negotiated between businesses and government agencies, and are specific to certain businesses and properties.
Non taxable taxes investment credit
Tax credits, when they come in various forms, are official incentives based on the Internal Revenue Code (and some state tax codes) to implement public policy. Congress, in an effort to encourage the private sector to provide public benefits, allows participating dollar taxpayers to reduce the dollar from their tax liabilities for investments in projects that might not otherwise happen but to credit.
Federal Historic Rehabilitation Tax Credits
Legislative incentive program to encourage the preservation of "historic buildings". Congress instituted two-tier Credit Tax incentives under the 1986 Tax Reform Act. 20% credit is available for the rehabilitation of historic buildings and 10% of available credit for non-historic buildings, which first operated before 1936. Benefits accrued from tax credits in the year property placed in service, cash flow for 6 years and option of repurchase in year six.
Renewable Energy/Investment Tax Credit (ITC)
Investment tax credit allowed section 48 of the Internal Revenue Code. These investment tax credits vary depending on the type of renewable energy project; solar, fuel cells ($ 1500/0.5 kW) and small wind (& lt; 100 kW) are eligible for 30% credit of development costs, without the maximum credit limit; there are 10% credits for geothermal, microturbines (& lt; 2 MW) and combined heat and power plants (& lt; 50 MW). ITC is generated when qualified facilities are placed in the service. Benefits come from ITC, accelerated depreciation, and cash flow over a 6-8 year period.
Although it will expire at the end of 2015, the ITC for residential solar installations is renewed in December 2015. Credits will continue at 30% through 2018, and will slowly decline by 10% by 2022. ITCs for other technologies (including geothermal) are extended one year. The installation will be considered eligible for the ITC based on the date when construction began.
Renewable Energy/Production Tax Credit (PTC)
Section 45 of the Internal Revenue Code allows income tax credit of 2.3 cents/kilowatt-hour (as adjusted for inflation to 2013) for the production of electricity from utility-scale wind turbines, geothermal, solar, hydro, biomass and marine and plant hidrokinetik renewable energy. These incentives, renewable energy Production Tax Credit (PTC), was created by the Energy Policy Act of 1992 (with a value of 1.5 cents/kilowatt-hour, which has since been adjusted annually for inflation). By the end of 2015, a large majority in Congress voted to extend PTC for wind and solar power for 5 years and $ 25 billion. Analysts expect $ 35 billion investment for each type.
Low Income (Affordable) Housing Tax Credit (LIHTC)
Under the program, created in the 1986 Tax Reform Act, the US Treasury allocates tax credits for each country based on the population of the state. These credits are then awarded to developers who, together with equity partners, develop and maintain the apartment as an affordable unit. Benefits are derived primarily from tax credits over a 10-year period.
Quality School Construction Bond (QSCB)
QSCB is a US debt instrument used to help schools borrow at nominal rates for the rehabilitation, repairs and equipping of their facilities, as well as the purchase of land where public schools will be built. The QSCB holder receives a Federal tax credit in lieu of interest payments. Tax credits can be disarmed from QSCB bonds and sold separately. QSCBs created by Section 1521 of the American Recovery and Reinvestment Act of 2009. The Internal Revenue Code Section 54F also addresses the QSCBs.
Work Opportunity Credit (WOTC) credit
Work Opportunity Tax Credit (WOTC) is a federal tax credit that provides an incentive to employers to employ groups facing high unemployment rates, such as veterans, youth and others. WOTC helps these targeted groups get jobs so that they can acquire the skills and experience needed to gain better job opportunities in the future. WOTC is based on the number of hours employees work and profits the employer directly.
In December 2014, credit extended retroactively to early 2014 by the Tax Incidence Prevention Act of 2014 (TIPA), P.L. 113-295. The Act approves credits only until December 31, 2014. Then, through the American Protection of the 2015 Tax Increase Act (UU PATH), Congress modifies and extends WOTC until December 31, 2019.
American Opportunity Tax Credit (AOTC)
The American Opportunity Tax Credit (AOTC) is part of the American Recovery and Reinvestment Act, which was signed into law in February 2009. The AOTC replaces the Hope Scholarship credit for the 2009 Tax Year and 2010, increasing the benefits for almost all Hope credit recipients and many Other students provide maximum benefits of up to $ 2,500 per student, 100 percent of the first $ 2,000 in tuition fees and 25 percent of the next $ 2,000, extending the range of income where taxpayers can claim credit, and make partial credit refundable. Critics have complained that the complexity and restrictions on eligibility make tangible benefits per post-secondary student much lower than the theoretical maximum, and even with tax credits, higher education remains unprofitable compared to other investments.
Country tax credit
Around 43 countries provide special incentive programs that utilize state tax credits. These include Brownfield credits, Film Production credits, Renewable energy credits, Historic Historical and other credits. The amount of credit, credit terms and credit fees vary from state to state. These credits may be certificates, which may be purchased as assets, or in more traditional pass-through entities. Tax credits can generally be used against insurance premiums, bank taxes and income taxes.
Oregon Oregon Housing Energy Tax (RETC)
The state of RETC Oregon is a tax credit for the solar system. In 2016, Oregon Gov. Kate Brown released a new budget proposal that did not extend the RETC program. In 2015, RETC gave $ 12.2 million in tax credits; by 2014, that's about $ 4.2 million. Under the budget proposal, the credit will expire at the end of 2017. The extension of the tax credit is a top priority for the Oregon solar industry.
Value added tax
Resellers or producers of goods or service providers (collectively, providers) must collect value added tax (VAT) in some jurisdictions when billing or being paid by the customer. If these providers use goods or services provided by others, they may have paid VAT to other providers. Most VAT systems allow the amount of VAT paid or considered to be paid for use to offset the overdue VAT payments, commonly referred to as input credits. Some systems allow the excess of input credits on VAT obligations to be returned after a certain period of time.
Foreign tax credit
The income tax system that imposes a tax on residents on their income worldwide tends to grant a foreign tax credit for a foreign income tax paid with the same income. Credit is often limited by the amount of foreign income. Credit may be granted under domestic law and/or tax treaty. Credits are generally granted to individuals and entities, and are generally non-refundable. View the tax credit abroad for more comprehensive information on this complex subject.
Credit for alternative tax base
Some tax systems impose a regular income tax and, where higher, alternative taxes. The US sets an alternative minimum tax based on the alternative size of taxable income. Mexico applies IETUs based on alternative measures of taxable income. Italy imposes an alternative tax on assets. In any case, where alternative taxes are higher than ordinary taxes, credits are allowed against future taxes for excess. Credit is usually limited in a way that prevents circularity in calculations.
See also
- Tax options
References
External links
- Work Opportunity Tax Credit
- State Incentive Database for Renewable Energy and Efficiency
- TAX CREDIT, REBATE & amp; SAVINGS - Department of Energy. Business Tax Incentives
- Tax credit - Child Poverty Action Group
Source of the article : Wikipedia
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