An income tax is paid to the government on income generated in whatever manner by an individual or an enterprise. The basis of the income – the capital – may be taxed separately, as in property or real estate tax.
Income tax relief is granted for some kinds of expenses and under particular circumstances. A reduction in income tax is granted by the state or federal government either by actually reducing the amount of the tax payable, or amending the rate used, which also lowers the resultant tax. This falls under categories for employees, self-employed individuals, contributions to charities, tax on property, medical and insurance premiums, and training and educational institutions. The taxpayer simply offsets the tax relief against the tax payable to the government.
However, not all kinds of expenses can be granted tax relief. Expenses for maintenance, travel, educational loan interest, contributions to pension plans and some other expenditures may qualify, if applied for. Also, portions of expenses for electricity, telephone, and leases can qualify; but, again, not all. Citizens affected by calamities and disasters are most often qualified for income tax relief.
The Economic Growth and Tax Relief Reconciliation Act of 2001 provided tax relief to almost four million citizens and families when it was implemented, with many being able to eliminate their tax liabilities altogether. Senior citizens, married couples and families benefited most from the Act.
Benefits under the Act include elimination of tax liabilities, lower tax rates on income, capital gains and dividend income, simpler retirement plan rules and pension plans, higher per child credit and dependent child care, depreciation on property, and much more.