Definition of 'Tax Benefit'
Deductions are amounts that can be subtracted from a person's or company's taxable income. For example, a person can deduct the cost of their mortgage interest payments from their taxable income. Credits are amounts that can be subtracted directly from the amount of tax owed. For example, a person may be eligible for a credit for the amount of money they contribute to their retirement savings. Exemptions are amounts that reduce the amount of taxable income that a person or company has. For example, a person may be exempt from paying taxes on the first $12,000 of their income.
Tax benefits can be very valuable, as they can reduce the amount of tax that a person or company owes. However, it is important to be aware of the different types of tax benefits and how they work, in order to maximize their potential savings.
There are a number of factors that can affect the amount of tax benefit that a person or company receives. These factors include the type of tax benefit, the amount of income that the person or company earns, and the person or company's filing status.
Tax benefits can be a valuable tool for reducing the amount of tax that a person or company owes. However, it is important to be aware of the different types of tax benefits and how they work, in order to maximize their potential savings.
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