Tax benefits and tax credits

Despite the variety of taxes that exist in the U.S. – as well as the multi-level control over their payment – there are a growing number of citizens who are exempt from paying taxes through exemptions.

The number of legal tax defaulters has grown especially large since the 1986 reform, which doubled the personal exemption and also introduced new forms of tax credit: the Earned Income Credit, the Child Tax Credit, the Education Credit, etc.

One example of a tax credit, is the ability to use part of a home as an office for business activities and thereby deduct home office costs on their tax returns.

Programs such as the American Opportunity Tax Credit, a tax credit for parents during the first 4 years of a child’s education, are also widely used in the U.S. Some states give tax credits for education of children in elementary and high schools (as a rule they are valid for education of the child in public schools of the state).

Much attention in the U.S. is paid to the benefits for individual investors who invest in innovative businesses. For investors, whose normal rate of taxation of capital gains is 15%, the real rate is only 7.5%.

Traditionally, one of the most “favorable” areas of business is farming. In dry years, some farms manage to reduce their tax base to zero.