Tax Credit
Definition
Tax Credit: Tax credits reduce the amount of tax owed dollar-for-dollar, more valuable than deductions which only reduce taxable income. R&D tax credits are particularly relevant for startups—offsetting payroll taxes even before profitability. Other credits exist for hiring, investment in certain areas, and specific industries.
Example Usage
“The R&D tax credit saves us $80K annually in payroll taxes. For a pre-profit startup, that's real cash preservation.”
Common Misconceptions
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