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In relation to a person's income, explain each of the following: Tax Credit __________________________________________________ USC __________________________________________________ - Leaving Cert Home Economics - Question 12 - 2018
Question 12
In relation to a person's income, explain each of the following: Tax Credit __________________________________________________ USC ________________________________... show full transcript
Worked Solution & Example Answer:In relation to a person's income, explain each of the following: Tax Credit __________________________________________________ USC __________________________________________________ - Leaving Cert Home Economics - Question 12 - 2018
Step 1
Tax Credit
Answer
A tax credit is an amount that taxpayers can subtract directly from the taxes they owe. In relation to a person's income, it effectively reduces the total income tax a person is required to pay. This reduction is calculated based on gross income, where eligible amounts for tax credits are deducted to arrive at the final tax liability. An important aspect of tax credits is that employees receive notification from the Revenue Commissioners regarding their entitlements, which can include standard cut-off points.
Step 2
USC
Answer
The Universal Social Charge (USC) is a mandatory tax that is calculated based on a person's gross income. This tax is deducted before the contribution to pensions and is structured as a percentage of total income. Employees are generally liable to pay USC tax if their annual gross income exceeds a threshold of €13,000, with rates typically ranging from 1% to 8%. However, those earning less than €13,000 are exempt from paying this tax.