Tax Credit / Allowance
An amount subtracted directly from the tax you owe, reducing your bill euro for euro.
A tax credit lowers your final tax liability directly, unlike a deduction, which only reduces the income that is taxed. Common examples include personal allowances, credits for children, and incentives for things like retirement saving or home efficiency. Because credits cut the tax itself, they are usually more valuable than deductions of the same size. Claiming every credit you are entitled to is one of the simplest ways to keep more of your money. Assetli helps you keep the records you need to back up your claims.
Example
If you owe $4,000 in tax and qualify for a $1,000 tax credit, your bill drops to $3,000, a direct, full-value reduction.
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Related terms
Gross vs Net Income
Gross income is your total earnings before deductions; net income is what reaches your account after taxes and contributions.
Tax Base
The amount of income or value on which tax is calculated, after deductions but before credits.
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Tax Return
An annual filing that reports your income and deductions to calculate the tax you owe or are refunded.
Tax Deduction
An expense subtracted from your taxable income, lowering the amount of income that gets taxed.
VAT (Value Added Tax)
A consumption tax added to the price of most goods and services, ultimately paid by the end consumer.
Insurance Deductible (Excess)
The amount you pay out of pocket on a claim before your insurance starts covering the rest.
Insurance Premium
The recurring amount you pay, monthly or yearly, to keep an insurance policy active.
Insurance Claim
A formal request to your insurer to pay for a covered loss or event.