What is a '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.

RELATED TERMS
  1. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  2. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  3. IRS Publication 514

    A document published by the Internal Revenue Service that provides ...
  4. Tax Benefit

    A tax benefit is an allowable deduction on a tax return intended ...
  5. Tax Base

    The assessed value of a set of assets, investments or income ...
  6. Tax Exempt

    To be free from, or not subject to, taxation by regulators or ...
Related Articles
  1. Taxes

    Tax Credits And Deductions For Parents

    Your children can help you save on your taxes with these credits and deductions.
  2. Taxes

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  3. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  4. Taxes

    The Most Controversial Tax Deductions

    When it comes to taxes, it's hard to make people happy but these deductions raised more than the average amount of controversy.
  5. Taxes

    Calculating The Mortgage Interest Tax Deduction

    While the mortgage interest tax deduction is a cherished American tax break, it’s perhaps the most misunderstood aspect of homeownership.
  6. Taxes

    5 State Tax Issues For When You Leave the Military

    When you're budgeting for post-military life, certain state tax issues need to be considered.
  7. Taxes

    20 Tax Changes You Need To Know About

    Don't miss out on the tax changes. Here's a list that you need to know about.
  8. Taxes

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  9. Taxes

    5 Groups That Don't Pay Taxes

    Now that you've paid your share, find out who didn't have to pay taxes this year.
RELATED FAQS
  1. What is the difference between a write-off and a deduction?

    Understand the differences between a tax write-off and a tax deduction. Learn how each one works to reduce income taxes and ... Read Answer >>
Hot Definitions
  1. Asset Turnover Ratio

    The amount of sales generated for every dollar's worth of assets in a year, calculated by dividing sales by assets.
  2. Book Value

    1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated ...
  3. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
  4. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  5. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  6. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
Trading Center