I am confused by Making Work Pay Credit. I heard it is not a deduction and I am not sure if my nephew can claim it.
He started his first year self-employed business last year. He made approx. USD 17000 and has not yet paid quarterly taxes but will pay the entire taxes by April 15 this year. Does that mean he can't claim the 400 tax credit Schedule M?
A deduction reduces your taxable income. Multiply the deduction by your tax rate to determine the actual tax savings.
A tax credit is a direct reduction of your tax.
So if you have a $100 tax deduction and you're in the 28% tax bracket, you save $28. If you have a $100 tax credit you save $100.
Self employed people can still claim the making work pay credit. If you're a dependent then you can't claim it.
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