Join Earl Kay Stice for an in-depth discussion in this video Tax deductions and credits, part of Accounting Foundations.
What is the impact of a tax deduction…in our simple tax system?…So let's say you make 100 dollars.…Remember the first 50 is never taxed.…The second 50 would be taxed at the 50% rate…so you're gonna pay 25 dollars in tax total.…Now, let's say that of that 100 dollars you make…you decide to spend ten dollars…in a way that the government favors.…Perhaps you spend that ten dollars…as a charitable contribution or you spend…that ten dollars paying mortgage interest on your home.…So the government says, "Yeah we want…"to encourage that behavior, that's…"a good way to spend ten dollars."…Then you're going to get a tax deduction for that ten dollars.…
So how does that enter into the payment of your taxes?…Well now you have to compute your taxable income.…You made 100 dollars but ten of that you spent…in a special way which is tax deductible…so your taxable income is only 90 dollars.…So the first 50 is still tax-free, now the second 40…is taxed at the 50% rate, so you're going…to pay tax of 20 dollars.…So you see here that the tax deduction…
- What is accounting?
- Working with balance sheets and income statements
- Determining the costs of products
- Performing break-even analysis
- Determining average and marginal tax rates
- Understanding tax deductions and credits
Skill Level Appropriate for all
1. Basics of Accounting
2. Financial Accounting
3. Managerial Accounting
4. Income Taxes
Next steps3m 9s
- Mark as unwatched
- Mark all as unwatched
Are you sure you want to mark all the videos in this course as unwatched?
This will not affect your course history, your reports, or your certificates of completion for this course.Cancel
Take notes with your new membership!
Type in the entry box, then click Enter to save your note.
1:30Press on any video thumbnail to jump immediately to the timecode shown.
Notes are saved with you account but can also be exported as plain text, MS Word, PDF, Google Doc, or Evernote.