From the course: Finance Foundations: Income Taxes
Join today to access over 25,600 courses taught by industry experts.
Tax deductions and tax credits
From the course: Finance Foundations: Income Taxes
Tax deductions and tax credits
- What is the impact of a tax deduction in our simple tax system? Let's say you make $100. Remember, the first $50 is never taxed. The second $50 would be taxed at the 50% rate so you pay $25 in tax. Now, let's say of that $100 of income, you decide to spend $10 in a way that the government favors. perhaps you spend that $10as a charitable contribution Perhaps you spend that $10 as a charitable contribution, or you spend that $10 paying mortgage interest on your home. So the government says, "yeah, "we want to encourage that behavior, we want to encourage that behavior, "that's a good way to spend $10." To encourage these behaviors, the government will give you a tax deduction for the $10 that you spent in this favorable way. that you spent in this favorable way. So how does this $10 deduction enter into the payment of your taxes? Well now you have torecompute your taxable income. Well, now you have to re-compute your taxable income. You made $100 but $10 youspent in a special way You…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.