Tax Break

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Tax Benefit

    A tax benefit is an allowable deduction on a tax return intended ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Taxes

    An involuntary fee levied on corporations or individuals that ...
  4. Itemized Deduction

    A deduction from a taxpayer's taxable adjusted gross income that ...
  5. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  6. After-Tax Income

    The amount of money that an individual or company has left over ...
RELATED FAQS
  1. Which is better for tax deductions, itemization or a standard deduction?

    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ...
Related Articles
  1. Taxes

    Cut Taxes By Reporting Property Damage

    Know the options you have for your insured property if and when a disaster strikes.
  2. Taxes

    Common Tax Mistakes To Avoid

    Find out what mistakes people often make on their returns, and how to avoid them on yours.
  3. Taxes

    Simple Last-Minute Tax Tips

    A little preparation and organization can take the stress out of last-minute tax filing.
  4. Taxes

    Tax Deductions You May Be Missing

    Knowing the tax deductions you're entitled to can make or break your bank account.
  5. Taxes

    The Ultimate Tax-Time Checklist

    Find out what information you need to pull together before filling out your return.
  6. Taxes

    5 Tax Credits You Shouldn't Miss

    If you're not taking advantage of these deductions, you could be missing out on tax savings.
  7. Taxes

    Student Tax Breaks

    Education bills may not be as stressful as you think - these student tax breaks can help!
  8. Taxes

    Give To Charity; Slash Your Tax Payment

    Being generous has never been more (financially) rewarding!
  9. Taxes

    10 Most Overlooked Tax Deductions

    The receipts you cram into your wallet could be replaced with cash come tax season.
  10. Taxes

    Which Is Better? Tax Preparer Or Tax Software

    Every taxpayer – and every year – is different, so here are four factors to help you decide whether a tax pro or software is best for you.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center