In the United States, tax relief mainly refers to a government program or policy initiative that is created to lower the tax burden of the individuals or businesses. The major purpose of tax relief is to help a certain group of taxpayers or to bolster a specific goal of the government.
Tax relief works either by reducing the amount of tax paid by taxpayers or finding a way to pay back the people’s debt. There are mainly 4 specific forms of tax relief to lower the tax burden.
Taxable income can be reduced by using legal deductions. The tax deduction for home mortgage interest is used most commonly. Tax deductions can cut a taxpayer’s taxable income, thus releasing the burden.
A tax credit offers greater savings than a tax deduction, and it is directly subtracted from the total amount of tax that an individual owes after all the deductions. Tax credits are sometimes described as tax incentives. That is because tax credits can reimburse taxpayers for expenditures that are deemed worthwhile by the government.
A tax exclusion is another form of tax relief. Particular types of income can be classified as tax-free or tax relief, thus reducing the taxpayer’s tax amount. In some situations, the income that is excluded for tax purposes will not be recorded on the return. In other situations, however, the income will be recorded in one section and deducted in another section of the return.
Tax Debt Forgiveness
The Internal Revenue Service (IRS) has a particular program named Fresh Start. This program provides taxpayers with a variety of options to tackle outstanding tax debts, usually for a percentage of the original liability. Such an arrangement of tax relief enables the taxpayers to pay the reduced tax amounts over time and avoid a tax lien.