How does the tax system subsidize child care expenses? Q.How does the tax system subsidize child care expenses? A.Working parents are eligible for two tax benefits to offset child care costs: the child and dependent care tax credit and the exclusion for employer-provided child care. Read more about How does the tax system subsidize child care expenses?
What are error rates for refundable credits and what causes them? Q.What are error rates for refundable credits and what causes them? A.The IRS estimates two types of error rates for the earned income tax credit (EITC): the improper payment rate and the over-claim rate. The former includes IRS enforcement activities while the latter does not. The IRS has estimated an EITC improper payment rate of between 22 and 26 percent of EITC payments and an over-claim rate of between 28 and 39 of claims. Read more about What are error rates for refundable credits and what causes them?
What's the difference between tax deductions and tax credits? Q.What’s the difference between a tax deduction and a tax credit? A.Deductions reduce taxable income and their value thus depends on the taxpayer’s marginal tax rate, which rises with income. Credits reduce taxes directly and do not depend on tax rates. However, the value of credits may depend on the taxpayer’s basic tax liability. Nonrefundable credits can reduce tax to zero but any credit beyond that is lost. Read more about What's the difference between tax deductions and tax credits?
