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Simple English definitions for legal terms
investment tax credit
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A quick definition of investment tax credit:
An investment tax credit is a type of tax credit that allows businesses to deduct a percentage of the purchase price of capital goods from their income taxes. This is intended to encourage businesses to invest in new equipment and technology. However, this credit was mostly repealed in 1986. A tax credit is different from a tax deduction because it directly reduces the amount of taxes owed, rather than just reducing taxable income. Other types of tax credits include the child and dependent care tax credit, earned income credit, and foreign tax credit.
A more thorough explanation:
An investment tax credit is a type of tax credit that allows a percentage of the purchase price of capital goods to be deducted from the taxpayer's income taxes. This credit is intended to stimulate business investment in capital goods.
For example, if a business purchases a new piece of equipment for $10,000 and the investment tax credit is 10%, the business can deduct $1,000 from their income taxes.
However, it's important to note that the Tax Reform Act of 1986 generally repealed this credit retroactively for most property placed in service after January 1, 1986.
Overall, the investment tax credit is a way for businesses to save money on their taxes while also investing in their own growth and development.