Help Me Understand Under and Over the Line Taxes

Vol seemed like he had the greatest grasp of explaining taxes and I was wanting to know more about tax credits vs deductions, and if anyone can explain ebita a little bit more when working with business owners that would be great.

NOT looking for tax advice here, just some enlightenment in the ways to understand taxes when working with retirees and business owners.
Thank you,
 
Vol seemed like he had the greatest grasp of explaining taxes and I was wanting to know more about tax credits vs deductions, and if anyone can explain ebita a little bit more when working with business owners that would be great. NOT looking for tax advice here, just some enlightenment in the ways to understand taxes when working with retirees and business owners. Thank you,
above line lowers income. That's easy if you're W2: contribute to a retirement account. Below the line lowers taxes - with deductions. As to business owners, they also have deductions below the line to lower taxes. But, in addition to retirement accounts, they can lower income ( above the line ) with business expenses.

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above line lowers income. That's easy if you're W2: contribute to a retirement account. Below the line lowers taxes - with deductions. As to business owners, they also have deductions below the line to lower taxes. But, in addition to retirement accounts, they can lower income ( above the line ) with business expenses.
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Tax credits are items that are given special treatment by the government to encourage their useage. These are things like credits for energy conservation, for hiring felons upon release from prison, or for higher education tuition.
 
In short, tax credits are a dollar for dollar reduction of your income tax. Tax deductions reduce taxable income. While there is a lot more to it, that is the short of it. Also, if the dollar amount is the same, a credit is better than a deduction.

For a business owner, a lot will depend on the filing status of the business. Some will be pass through and some will be separate tax entities.

You may be thinking of what I posted on the LLC thread. For agents it is pretty simple, there really isn't much advantage, unless state rules come into play. But when you start talking "real" businesses with physical assets, employees, etc. then it gets a lot different. Liability becomes a big factor in choice of structuring the business. There is more liability than just E&O for the principal.

Just as an example, for a corner deli, slip and falls are huge. The owner needs to protect himself from that liability, both with insurance and corporate structure. As an agent working out of home office that doesn't have client visits, you'd have to sue yourself for a slip and fall to matter.
 
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