What is the Difference between Tax Deduction, Credit, Write Off, Exemption, Rebate
Finance and economics are important not only for our financial matters but for the whole world. Finance is the backbone of every economy in the world. Tex, credit, write off, rebate are some commonly used terms, in this regard. Although, sometimes they are used interchangeably, and sometimes people use them at wrong places, yet they are different from each other. Here, we are describing difference between them.
Tax Deduction
Income tax or corporate tax system has room for tax deduction, although some limitations and conditions apply. It is usually applied on those expanses which produce income and other benefits for a person. In different systems tax deductions are applied in different ways.
Credit
When a party provides some resources or money to other party, it is called as credit. Instead of paying them back, immediately, second party offers a schedule to pay them later in a specific period of time. Other than money, credit could be goods and services also, which is called as consumer credit.
Write off
Reduction is known value is called as write off. In accounts, it refers to the recognition of the reduced or sometime zero value of an asset. Write off is also used in vehicle insurance, where it describes a vehicle which is economical to replace as compared to repairing it.
Exemption
Exception is usually used in terms of tax, when we talk about finances and economics. Tax exemption allows a specific amount of income or some other value to be legally excluded to completely avoid or partially reduce taxation.
Rebate
Rebate is one of many ways, which are used to promote sales of product. Actually, this is the amount paid by way or reduction, refund or return on what has already paid. Rebates are offered sometimes by manufacturers and sometimes by retailers.
Tax Deduction vs Credit vs Write Off vs Exemption vs Rebate
Tax deductions applies to income tax, with some limitations, tax exemption is also the similar term but it applies on the actually income to reduce the tax, legally. Credit is the provision of money, goods or services by one party to other, which second party will repay over a period of time. On the other hand, write off is the reduction in actual value of an asset. Rebate is different from all other terms, as it is the promotional strategy. Rebate is the return or refund of that money, which one has already paid.
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