What is the 5000 dollar tax credit?

I am sorry to all you out there who are well versed in tax law, and code.





I dont understand what the 5000 dollar tax credit means...


does it mean that we pay 5000 dollars less in taxes?


Please explain to me in laymans terms what this means... thank you :)

What is the 5000 dollar tax credit?
I assume you're talking of the McCain $5000 tax credit for healthcare.





It works like this (as do most tax *credits*):





At the end of the year you paid $6000 in Federal taxes through payroll deduction (like most people).


You paid $4,500 for health insurance during the year.


You then deduct the $4,500 from the $6000 tax, leaving you only owing $1,500 in taxes. Since you already paid the entire $6000, you get a tax refund.





You can only deduct the actual expenses up to $5,000. If you spent more than $5,000, you can still deduct the maximum of $5000. If you spend less, than you can deduct the amount spent.





Tax credits are the best type of tax break to have because they lower the amount of tax paid.
Reply:It is an investment account that you can put up to $5k in that will never be taxed. This is the best investment plan we have ever seen. Much better then RSPs