Tax Credits
Federal Tax Course – Lesson 18

General Introduction 1801
What is a Tax Credit 1802
The Credit for The Elderly and Permanently Disabled
Introduction 1803
How the Credit is Computed 1804
Reductions 1805
Miscellaneous Provisions 1806
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
General Rules 1814
Hope Credit 1815
Lifetime Learning Credit 1816
Choosing Which Credit to Claim 1817
The Income Phaseout 1818
The General Business Credit
Introduction 1819
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.

More in the Federal Tax Course