Tax Cut or Tax Credit? I'm Confused....

**forHISglory** · 02-27-2009, 11:56 PM

I admit it; I'm confused. Obama said that in April we will start seeing more money in our paychecks. So.... is it a tax cut or a tax credit? I've been reading news reports and listening to news, and they are using both terms. Can this be right? Can someone explain this in very simple language?

Thanks!

**MommyBliss** · 02-28-2009, 12:14 AM

I think it's just a tax cut.

**Thevail** · 02-28-2009, 12:37 AM

It's a tax CUT..because it will actually lower the percentage rate at which you are taxed.

So if you were taxed at a certain rate (say 20%) before then you would be taxed at a lower rate (say 15%) now.

The good news about this is that unless someone raises the "new" lower tax rate it's permanent, I think.

It's a pretty good deal for most people because it means that more people are going to get to keep more of their money. I don't know why republicans seem to be upset about it since it was what they've said they wanted all along.

It doesn't do much for people who don't have jobs, but they got an additional $25 a week added to their unemployment benefits AND they no longer have to pay any taxes at all on the first $2400 in unemployment no matter how much money they may have made in the year aside from that.

Also funding for food stamps has been increased to help the very poorest people who can't pay their bills and buy food on unemployment.

**mombottoo** · 02-28-2009, 09:46 AM

It is a tax cut. A credit is when you deduct it off of your 1040 when you file taxes.

**Cricketlegs** · 02-28-2009, 09:57 AM

****Disclaimer*****

I don't have all the info and I was half asleep when I watched the news so bear that in mind and do some research for yourself as I will be doing.

I just saw this morning on the news that taxes will raise for everyone who uses electrity, gas, heating oil etc. He has to find 300 billion dollars and there are only something like 300 million of us in the USA.

It is looking like a back door way of raising taxes on us all by a man who said he would not raise taxes for anyone who makes less than $250,000.

If the info is right, and I say IF, then we all just got taxed short of off grid people.

I am going to look into this.....

**beks37** · 02-28-2009, 10:25 AM

It's also a tax credit too. If you don't earn enough, you file for the rest of it on your taxes. I just googled the words obama withholding tax and came up with this news article. http://www.startribune.com/nation/40...D3aPc:_Yyc:aUU

Below is an excerpt:

The tax credit -- up to $400 for individuals and up to $800 for married couples -- will be doled out through the rest of the year through a payroll tax cut reflected in paychecks. Most workers should see about a $13 per week increase in their take-home pay. But the credit is phased out for higher-income taxpayers. People who do not earn enough money to owe income taxes can file for their share.

**Greebo** · 03-02-2009, 09:30 AM

Originally Posted by mombottoo

It is a tax cut. A credit is when you deduct it off of your 1040 when you file taxes.

I think that's a deduction. I thought credits kicked in after you figured out your payment or refund, while deductions are used to help determine your payment or refund.

IE: A deduction of $500 may only save you $150 because the deduction affects your taxable income, but a credit of $500 means you get back $500 more or pay $500 less.