2.   Understanding Taxation
 

When you are figuring how much state or federal taxes you owe, you don’t pay based on the total income you’ve earned.  You are allowed to subtract an amount for exemptions – to free up a portion of your income from tax because you have to meet the basic needs for yourself and the others you support.  You are an exemption.  If you have a spouse, that person is an exemption.  If you have children, each of them is an exemption.

In certain situations, the government actually wants to help you pay your taxes. To do so, they issue tax credits or subtractions directly to your taxes before you pay them.  A tax credit is subtracted dollar for dollar on the tax we owe.  The government uses tax credits for activities it wants to encourage people to do: first-time home purchases, college tuition, or solar energy for our homes are examples.

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