Use of term "Tax Credit" vs "Tax Deduction" on web page.

Andrew Gould andrewgould at yahoo.com
Wed May 28 15:44:22 PDT 2003


The web page:

http://www.freebsd.org/donations/index.html#donating

discusses the eligibility of donations as "Tax
Deductions", which is most probably correct.  However,
the term "tax deduction" is used interchangeably with
the term "tax credit". In the US, these terms have
very distinct legal definitions. Please consider
replacing occurrences of "tax credit" with "tax
deduction".

The difference is important to donors:

Tax credit - A tax credit reduces your taxes directly.
If you earn $1000 at a 10% tax rate, you owe $100 in
taxes. A $100 tax credit would reduce your taxes by
$100.

Tax deduction - A tax deduction reduces your taxable
income. In the example above, a $100 tax deduction
would reduce your taxable earnings by $100; but would
reduce your taxes by only $10.

I'm not trying to be picky. I just want to prevent
potential problems.

Best regards,

Andrew L. Gould


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