What are tax credits?
Tax credits are payments from the government to help with everyday costs. If you are responsible for at least one child or young person who normally lives with you, you may be eligible for Child Tax Credit. If you work or earn low wages, you may be eligible for Working Tax Credit. Tax credit isn’t actually a tax, it’s money that you receive regularly and you don’t even have to be a taxpayer yourself. For more information you can ring the tax credits helpline on 0800 731 9133 or visit www.hmrc.gov.
The term tuition tax credits is popularly used to refer to various tax-based programs that funnel money to private schools. There are two main approaches: tuition tax credits and tuition tax deductions. Under tax credits, an income tax bill is directly reduced. If you owe $4,000 in taxes for the year and you are eligible for a $500 tuition tax credit, you only have to pay $3,500 in taxes. In essence, the government has given you a gift of $500 to offset your private school tuition. A tax deduction reduces the taxable income used to calculate how much you owe in taxes. Let’s say your taxable income is $50,000 but you are eligible for a state’s $1,000 tuition tax deduction. You would then pay taxes based on a taxable income of $49,000. Fundamentally, tuition tax credits are a way to use public policy to increase the money going to private schools and to relieve the financial burden on middle- and upper-income families with children already in private schools. “Tuition tax credits are an
What are tax credits? The mere mention of the term may induce boredom, but if you want to keep up with how the government is handing out money and get your stake, then you need to know. Gordon Brown is a “social” chancellor and wants to change society through the tax system. On the one hand he wants to target the UK’s most disadvantaged, for example, single parents and working mothers. At the same time, he wants to “make work pay”. By using the tax system – the gauge of people’s incomes – he can target the most needy through means testing. Tax credits are the product of this integration. Did he invent them? While they have been criticised, they are not a fly-by-night project. The chancellor remains firmly committed, despite criticism that they are too complex and bureaucratic. Tax credits, however, were not invented by the chancellor. Tax credits have been used as a way of administering benefits for children in Canada and Australia for a number of years. In Canada they have been around
