Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Tax Break

What it is:

A tax break is a tax deduction, tax credit or reduction in tax rate.

How it works (Example):

For example, let's say John and his wife had a baby in 2011. When John files his tax return for the year 2011, he will qualify for a $1,000 child tax credit, which lowers his tax bill by $1,000. In other words, John and his wife get a tax break for having a baby.

There are hundreds of different kinds of tax breaks available to individuals and companies, though these tax breaks are usually only available under certain circumstances. Many tax breaks are not available to taxpayers with high incomes.

Why it Matters:

Tax breaks lower tax bills, which is why taxpayers and tax advisors spend considerable amounts of time determining which deductions and credits they qualify for each year. Governments often implement tax breaks as a way to encourage certain behavior or investment in certain industries or programs.

Related Terms View All
  • Z
    On the Nasdaq market, for example, the letter Z after the ticker (an XYZ Company security...
  • Per Capita
    For example, per capita GDP is a country’s gross domestic product (GDP) per person. The...
  • Minor Downtrend
    The minor trend is the last of the three trend types in Dow Theory -- the other two types...
  • Vagit Y. Alekperov
    Born in 1950 in Baku, Azerbaijan, Alekperov is the youngest of five children. He went...
  • Minimum Margin
    When a trader engages in trading on margin, the margin account must contain at least $2,...