Re: How do "tax deductible" contributions work?

From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: How do "tax deductible" contributions work?
Date: Fri, 31 Jul 1998 19:54:06 -0400

Next Article (by Author): RE: Income reduction from rental property Rick.Schafer@bdk.com
Previous Article (by Author): Re:Will Ideas Sought "Harold R. Justice"
Top of Thread: RE: How do "tax deductible" contributions work? kmealy@juno.com (Keith Mealy)
Articles sorted by: [Date] [Author] [Subject]

>I am wondering what "tax deductible" really means.

It means that your *taxable income* is reduced by the
amount of the deduction (to first order).

>Is it a 1:1 relation to what you owe in taxes?

Absolutely not!

A $1 deduction reduces your taxable income by $1, and therefore
reduces your *taxes* by $1 times your tax bracket.  So if you
are in the 28% bracket, $100 of deductions will reduce your
taxes by $28 (to first order).

The 1:1 thing is a tax CREDIT, not a tax DEDUCTION.

Rich Carreiro
rlcarr@animato.pn.com
P5-100/RedHat Linux 4.1



- -

Go to Jeff Salisbury LWGate Home Page.