Understanding Tax Relief and Its Benefits
Most people are obliged to pay taxes, yet some are exempted from it. Taxes are a resulting revenue of taxation, which is a binding financial charge imposed upon the taxpayer by the government.
Each country has a tax system in which some required a levy a flat percentage rate of taxation on personal income or based on annual income amounts. On the other hand, some countries compel no taxation at all or a low tax rate.
The Purpose of Taxation
The goal of taxation is to raise revenue to fund governing projects of the government. These involve expenditures on the economic infrastructure such as public transportation, roads, legal systems, sanitation, health-care systems, education and public safety. It also includes scientific research, military, public works, public insurance, culture and the arts and government operation, among others.
For some people paying taxes could be a way to help people who are in need, yet some are quite having difficulties in paying their taxes. This is because they have many personal expenditures in a period. With this condition, the government has provided an incentive or a program through the means of tax relief.
Defining Tax Relief
A tax relief is a program or incentive that could lessen the amount of tax to be paid by the tax payer. One example of this is if the tax payer spends money on particular outgoings, the amount he spends could be withheld from his total income resulting to paying less tax.
Other examples of tax relief involve tax credits for the purchase of new equipment such as heating and cooling apparatuses and allowable deduction for pension contributions.
There are different provisions provided in tax relief by different countries. In the United States, they have this “American Taxpayer Relief Act of 2012.” This is made permanent on reducing tax enacted between 2001 and 2010 and extended other temporary tax provisions for between one and five years.
The American Taxpayer Relief Act of 2012 has been passed by Congress on January 4, 2013. It aimed to prevent most of the sunsetting tax cuts from expiring. These income tax cuts were made constant for all but the taxpayers with the highest income. There were also three provisions that were extended till 2017.
The Benefits of Tax Relief
One of the greatest benefits of tax relief is to reduce the tax liability of the person or a business entity. This could support their financial obligations and release them from financial difficulties.
Tax relief could also deliver aid for a particular event or cause. In some cases, such as in the calamity stricken area, the victims could be given some type of tax relief.
It may also support environmental causes. This includes having tax credits for buying energy-efficient appliances, windows, or roof.
There are various tax relief provisions prepared by different nation depending on their tax systems. Some of these tax relief provisions are granted on the income earners and to high earned income earners. Meanwhile, pensioners are also given tax deductions.
So, where to get tax relief? Some countries have provided a tax relief on the following areas:
Tax relief on pension payments
A retired tax payer could get tax relief from his personal pension, occupational pension or stakeholder pension. On the other hand, the pension scheme must be approved by the HMRC. This could release the pensioner from the liability of paying taxes, as he already retired from work.
Tax relief on life insurance
Another way to get tax relief is on life insurance. On the other hand, this depends on the tax system of your government regarding tax relief on life insurance. There is a designated period on whom to get this tax relief. To get reduction of tax, you just have to settle a net payment of premium to the insurance company.
Tax relief on payments to other people
You may lessen the burden of paying taxes on making payments to other people. This is mostly done by business entities. One example of this is having payments to charities or payments to maintenance.
Tax relief on rental income from property
This tax relief depends on the type of rental income you have. If you are a landlord renting out your property to others, you could get a certain amount for tax-free. Likewise, if you earn other income from your property such as renting your property as a storage or renting a parking space on your drive. It is advisable to check the amount of reduced tax that will be given.
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