A declaration and payment of taxes is always a tricky business, and everyone tries to find a way to pay less. Credit and reduction are among the most commonly used because they affect most taxpayers. The two principles are similar, but the differences lie in the types of reimbursement. Thus, a tax credit is more advantageous, because the IRS can give you money if it exceeds your tax return, then you do not touch anything in the case of a deduction.

Today, there are many cases where you can enjoy tax benefits, it can be a green investment, support or dependent children. It is necessary to be well informed, as the benefits vary for each category. In general, you can benefit from a tax reduction in the case of certain real estate investments, and the deduction is enabled in social investment. Both concepts have been implemented by the state to educate citizens to invest in strategic areas.


The tax deduction

The tax deduction is a tax benefit that does not give rise to any refund. For example, a taxpayer’s return is 4500 euros, and it receives a deduction of 5 500 euros thanks to its property or land transactions. The result is that it does not pay taxes, but he lost 1000 euros difference. Therefore, it is necessary to calculate the exact amount of investment for this benefit offered by the state. It would be ideal to turn this deduction credit, but it is far from simple, as both methods are based on your type of investment.

There are several major laws that provide access to tax deductions, and include the Robien law that focuses on real estate, plus you can earn deductions if you use a LMP (Furnished Rental Professional). The latter case is more interesting than its equivalent personnel Leaseback, and it occurs when you buy an old building, and you rent it after making the necessary renovations. We can see that the deduction is interesting when the scale is balanced with your tax amount. It is important to calculate expenses based on this reduction, and several government sites provide information on the types of investments that can benefit.

The tax credit

As mentioned earlier, the tax credit is similar to the reduction, but the main difference is that the IRS will refund the difference if it is in your favor. There are several sectors that benefit from tax cuts. And include a donation to a political movement, buying a green vehicle, a research investment to boost business and promote employment in areas that have unemployment problems. One can see that it is the government’s priorities that provide access to credit, namely, ecology, employment, research and purchasing power. However, the personal is no exception and you can access it when you install solar panels, or you’re renovating your home for better thermal management.

Calculating the credit rate based on criteria such as length of the house, the price of the equipment duty free, and the official rate set by the state. For example, consider a taxpayer who decides to install a solar heating and equipment to reduce the flow of water. The calculation of its tax return is 3700 euros, but the tax credit is 4800 euros, so not only he is paying more taxes, but receives 1100 euros from the tax. Another advantage is that the credit is fully autonomous, that is to say that you still receive the money even if you are not taxable. We can see that the tax credit is very interesting in relation to the deduction, and this, for both the professional and the individual. One might think that rates will rise in the future, because these are areas that will take more and more important.