Income Tax Relief

Income tax is a tax paid by citizens to the government on income earned through various sources. It is applicable to both employed workers and the self-employed. The income tax is a form of direct tax since it is applied directly on the income obtained. Income tax relief is a set of tax deductions granted by the tax authorities in the case of certain expenses and on certain occasions.

When calculating annual income tax, taxpayers can offset the amount of tax relief granted against the income tax they owe to the government. Similar to personal tax relief, employee tax relief is offered year-round. Tax relief typically falls into several categories, such as tax relief for employees, the self-employed, educational and training institutions, property, medical and insurance premiums, and payments to charities.

However, not all expenses fall within the scope of tax relief. Common expenses that qualify for tax relief are those incurred for upkeep, travel expenses, interest on educational loans, certain fees and subscriptions, and contributions to pension plans. A portion of the expenses incurred for lighting, phone bills, and rent is also considered to provide an income tax deduction. Income tax relief is specially granted to citizens who are affected by natural calamities. An example of this is the tax relief granted by the federal government to the victims of the devastating hurricanes that hit the southern states in 2005.

The “Economic Growth and Tax Relief Reconciliation Act of 2001” is expected to provide tax relief to taxpayers across the country. The Treasury Department has estimated that 3.9 million individuals and families will be able to completely eliminate their income tax liability thanks to the Act. Additionally, additional estimates show that seniors, married couples, and families can expect reductions in their annual income tax obligations.