Hi this is Tutor Nick P and this is Lesson 591. The title of today's lesson is the difference
between tax cut , tax deduction and tax relief . Okay. If somebody wants a screenshot , do it
right now. All right. Now this is a request video. And I can easily see how this can be confusing,
especially to ESL students, but even native speakers sometimes you know, want this clarified
to them because all three of these words have something to do with lowering taxes. But what
is the difference between them ? Okay. So let's get right to it. A tax cut is an act of reducing
or lowering an individual's or company' s tax by the local or federal government. So you know,
in the United States like an individual state could just lower taxes or they they could have
more tax deductions for companies that are in their states or you know, they could even
have lower taxes for the individuals. So because in the US there's both state tax
and then there's federal tax. So that's why you could have a local and the federal government.
All right. Let's continue. A tax deduction is something that an individual or company may
be able to take as part of their tax return to reduce the amount of tax one must pay if it is
allowed by law. So you know, if you're if you pay taxes and you know, there's certain things that
you know, if you qualify you can use them to minus from either your your overall income
or your profit to lower that number and by doing that then you lower your tax burden. So you have
a lot of tax deductions. So each individual thing that you take on your tax forms to lower
that tax burden is a tax deduction. All right. Let's continue. So for example, in simple terms,
if an individual taxpayer has dependents, each dependent could be a tax deduction. Yeah. So
you know if you had so many children or if you were taking care of your parents and you you
say that you know, they are dependent on you then you could take them as a tax deduction. All right.
Or if you are a homeowner, you may be able to take a tax deduction on your mortgage. Okay. Mortgage
interest, your mortgage interest. So this would only apply to people that own homes , but you
know in order to encourage more people own homes maybe they they offered this extra tax deduction
to them. Or if you had an exceptional amount of hospital bills or health care bills that year.
You know, because remember there are there are standard taxes which which factor in some health
issues that the average person will pay for, but maybe you had a really bad year. Maybe you got a
terrible disease like cancer or maybe you got into a terrible car accident and you were in the
hospital and you had bills that were enormous. Maybe even more than your income for that year
well if you had tax bills more than your income you could deduct the whole thing and not really
have any tax burden for that particular year. At least no federal or state tax anyway. Okay. Good.
Let's continue. All right. If you are a company there are many many many possible tax deductions,
reducing any costs one has to run a business. So anything that you put into your business or
you have to buy to improve your business usually could be a tax deduction. So you put that on there
too so again lower your cost it lowers the profit it lowers the the amount of money you took in
and therefore it lowers your tax burden. Let's continue. All right. Good. So all right here.
We say for example you know the eg. stands for for example, rent these are the most basic ones
obviously if you have a store and you're renting space you can deduct that. Advertising you know,
advertising in newspaper , online on TV whatever,
buying machinery, etc. So all of these things could be used to minus from your overall profit
to reduce your tax burden. All right. Let's continue. All right. Tax relief. Tax relief
is when governments target certain groups to help lower their tax burden . Often a group
that can help them get votes. Yeah. That's a lot of the reason that why politicians do it
but of course they won't say that. They'll say that this particular group is more in need
of reducing their taxes for whatever reason. And you know, they they will say that they
support this group and therefore this group needs more tax relief than other groups. Okay.
All right. So let's continue. Tax relief may also be in the form of an initiative to strengthen
goals. So if you're a political party and you say you're in favor of some sort of agenda and this
company kind of helps your agenda you may offer extra tax relief for them. Now the tax relief will
come in the form of more tax deductions, but the fact that they're targeting you and making you ,
where you can take more tax deductions than others is actually tax relief. Okay. Good. So for example
if a government does environmental improvements such as solar panels, improvements in reducing
pollution etcetera. Or if you're an environmental company say you're a company that makes
solar panels you'll get a lot of tax deductions for that or what or anything that helps kind of
solve that problem. They they, they, they target you but in a good way. So that they they lower
your tax burden. So they are offering you tax relief in this sense. All right. Let's continue.
All right. So now we got six examples to show uh you know so you get a better feel of just how,
you know, the difference between these terms. Here's the first one. The most general one.
That political party is promising big tax cuts if elected. So here they're just saying in general.
Maybe they're offering tax cuts across the board. Meaning maybe everybody gets tax cuts. Then then
that's what that is. That's just tax cuts in general. You're lowering everybody's tax burden.
Number two. He usually just takes the standard tax deductions on his form. Yeah. So even an average
person if you're not married, you don't have a family or you didn't have great healthcare costs
that year or you don't own a home a lot of people can just do the standard one. And the standard
one at least in the US it's a lot easier once you have all these other deductions. Your taxes start
to get a lot more complicated, but you know you could just take the standard one. Okay.
All right. Let's continue. Number three. He is the head of the household
and has a number of deductions due to many dependents. Yeah. So of course,
this is for an individual again The more children you have the more dependents you have or again if
you're claiming your parents or or somebody else or any other relative that especially
if they live in your household and you say that you're supporting them you could put them down.
Now remember the only thing about a dependent is if you claim a dependent on your tax return,
another person cannot claim that dependent too. so so only one person you know, for each person
only only the only one person can claim them as a dependent. All right. Good. Let's continue.
All right. Number four. That company had a lot of renovations and could take more
tax deductions. So again anything that you do to improve your business. So even if you were
fixing up your store or your locations, you know, making it look nicer and that costs you money to
do that , that could be tax deductions. Obviously. Okay. Good. and number five here. That political
party promises if elected they will offer more tax relief to families. Yes. So maybe they'll
even lower the percentage even more or whatever it is if you're a family you're going to get more tax
cuts than other groups. So that's that's one of the ones where that is a particular group. Number
six. That political party offered tax relief to any companies that made green improvements. Well
again, so if they do something in the factory that makes it more environmentally you know,
friendly. Then anything they do they may lower their tax burden overall. That's what they can do.
So they're targeting a group, but actually in a good way. You know, we often hear target in a
bad way, but this is in a good way. That if you do these things you get you can lower your tax burden
more. So you're getting more tax relief in this sort of sense. Okay. Anyway, I hope you got it. I
hope it was clear. I hope it was very informative. I hope now you got a much better feel of when
you would use one of these terms instead of another. Okay. Thank you for your time. Bye-bye.