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"Tax credits are subtracted not from taxable income, but directly from a person’s tax liability; they therefore reduce taxes dollar for dollar. As a result, cre
by NoPiece 9y ago
"Tax credits are subtracted not from taxable income, but directly from a person’s tax liability; they therefore reduce taxes dollar for dollar. As a result, credits have the same value for everyone who can claim their full value."
http://www.taxpolicycenter.org/briefing-book/whats-difference-between-tax-deductions-and-tax-credits http://www.taxpolicycenter.org/briefing-book/whats-differenc...
- maxerickson 9y agoRight, they are talking about the situation where someone only owes $6,000 in taxes. They get a $6,000 tax credit. So setting aside whether this is fair or unfair, people that owe more taxes clearly get a bigger benefit from the credit.
- rukittenme 9y agoThe poor don't have taxable income. You can only claim the credit if you itemize which is restricted to even higher tax brackets.
- maxerickson 9y agoNo need to itemize, it is reported on line 54 and offsets line 44: https://www.irs.gov/pub/irs-pdf/f1040.pdf https://www.irs.gov/pub/irs-pdf/f1040.pdf But lots of people don't end up paying $7500 in income taxes.