California Tax Credits - Part Deaux
California is among the nations leaders with its high maximum income tax rate, but California Tax Credits are many and varied.
California is certainly no slouch in its support for the concept of public policy control through tax incentives. The State supports and encourages a great deal of social activities by the use of a very extensive and liberal system of California Tax Credits. These credits, unlike deductions which reduce taxable income, are taken directly from tax owed and represent actual savings of 100%. The California Tax Credits are available to both on both individual and business taxes.
The list of California Tax Credits is very long and it also changes quite frequently. Each year, many credits expire requiring tax payers to file special forms for carry-over credits from previous years. The web site of the California Franchise Tax Board which regulates State taxes is the best spot to find the most current list and the list of recently expired credits.
The list shows the type of credit, the applicable section of the tax code, and the conditions and qualifications of the credit. Although, in many cases, you will have to refer to the actual section of the code to insure complete understanding, other credits are easy to understand. They actually make some interesting reading and give an idea of how comprehensive and liberal they really are.
One of the current credits deals with income earned by convicts while still inmates of prisons. Apparently, the Government of California thinks they have enough problems already and offers a credit equal to 10% of their income. It would appear that this credit would, in effect, exempt inmates from paying taxes on their prison incomes. It is highly unlikely that an inmate in prison would get into too high a tax bracket.
The California income tax is a progressive tax that starts very low for low income tax payers and goes up to a high of 9.3% for those earning around $50,000 a year. When you combine such a high rate with a group of credits that encourages the financial support of charitable institutions, you can produce some generous high income givers. This is only one aspect of California Tax Credits. Each resident of California owes it to themselves to be aware of just what kind of credits are on that list for both personal and political reasons.