2 ms·
I don't know that the math is right in this piece. In one paragraph they make mention of "a yearly tax credit of $150,000", then in the next they say "With a y
by gjem97 10y ago
I don't know that the math is right in this piece. In one paragraph they make mention of "a yearly tax credit of $150,000", then in the next they say "With a yearly tax deduction of $150,000 and a second deduction of 35% of costs (35% of $1 million = $350,000), that’s a total of $500,000 in costs recouped, or 50%."
Credits and deductions are not the same thing. A credit is netted against your tax bill, a deduction reduces the taxable amount of your revenue. A $1 deduction therefore provides a much smaller benefit than a $1 credit.
- itsdrewmiller 10y agoI suspect the math is right but the writer doesn't understand the difference. 150k credit + the standard 35% rate on 1m cost would be 500k net. But this only actually works if you would have had to pay 500k in taxes to begin with. If you're losing money or doing other tax avoidance stuff, you don't actually get the full benefit.
- philipodonnell 10y agoFrom the article: >The federal government ... grants a qualified child-care program a yearly tax credit of $150,000. In addition, the government allows a company to deduct 35% of its unrecovered costs from its corporate tax bite. This may just be unfortunate phrasing. The author uses the word "deduct" but then says its deducted "from its corporate tax bite", not EBITA. As you point out a reduction in EBIDTA does reduce the tax bill, just not 1:1 like a tax credit. The phrase isn't clear that its another tax credit or a deduction. Minus points for a lack of clarity either way...