Tax Break

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DEFINITION of 'Tax Break'

A tax break is a savings on a taxpayer's liability. A tax break provides a savings through tax deductions, tax credits, tax exemptions and other incentives. An example of a tax break is the First-Time Homebuyer Tax Credit which provided a tax credit up to $8,000 for qualified purchasers of primary residences on their 2009 and 2010 tax returns.

BREAKING DOWN 'Tax Break'

Tax breaks can greatly reduce a taxpayer's liability. Deductions are expenses that can be subtracted from gross income to reduce taxable income; credits reduce tax liability dollar-for-dollar and have a greater impact than deductions; exemptions occur where a tax for a certain item or type of income is reduced or eliminated.

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RELATED FAQS
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    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ... Read Full Answer >>
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    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
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    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
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    Credit card rewards are taxable in the United States some of the time. The Internal Revenue Service (IRS) classifies credit ... Read Full Answer >>
  5. Are Social Security benefits taxable after age 62?

    Eligibility to collect Social Security benefits begins at age 62. Many seniors, to collect larger benefit amounts, wait until ... Read Full Answer >>
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