What is the US tax credit


What is the US tax credit

What is a US tax credit is an amount of money a taxpayer can subtract from the taxes owed to their government. Unlike deductions and exemptions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax due. The value of the tax credit depends on the nature of the credit; Certain types of tax credits are granted to individuals or companies in specific locations, classifications, or industries.


At present, almost all types of businesses use various credit mechanisms to modernize production, purchase new batches of raw materials, and fill the shortage of working capital. For loans, most often turn to banks or other financial institutions. Among other credit products, a special type of lending can be distinguished - the investment tax credit, which is subject to state control.


US tax credit

The terms of an investment tax lending agreement are very similar to the terms of a traditional loan. Only in a specific case, the loan is not taken from the bank or fund, but from the state.


An investment tax credit can only take on a legal entity. The fact is that if the company suddenly stops fulfilling its obligations under the loan.


It can withdraw all its pledged property even without any court decision. If an individual ceases to fulfill his credit obligations, it is almost impossible to deprive him of a single dwelling.


The state in the tax code clearly indicates the types of taxes that can be given for an investment loan: these are income tax, local and regional taxes.


Investment tax

The investment tax exemption period is from 1 to 5 years. In some cases, it may be granted for up to 10 years. It is believed that this is enough to solve all the problems of the legal entity.


After a legal entity has concluded an agreement with the state for a specified period, that person may, for some time, pay the appropriate type of tax in precisely agreed amounts or a strictly defined percentage. This continues until the moment when the sum of all outstanding taxes equals the sum of the investment loan.


If several investment tax credits operate simultaneously between the state and the enterprise, the cumulative amount of “tax arrears” is calculated separately for each credit.


It is worth paying attention to the fact that the organization or enterprise will not be able to reduce tax payments indefinitely. It does not depend on the number of tax credits. Simply put, the state has set the maximum amount of tax reduction to ½ of the regular payment. That is, the legal entity will not be able to double its payments to the budget.

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