Corporate Tax in The United States - Tax Credits

Tax Credits

Corporations, like other businesses, may be eligible for various tax credits which reduce federal, state or local income tax. The largest of these by dollar volume is the federal foreign tax credit. This credit is allowed to all taxpayers for income taxes paid to foreign countries. The credit is limited to that part of federal income tax before other credits generated by foreign source taxable income. The credit is intended to mitigate taxation of the same income to the same taxpayer by two or more countries, and has been a feature of the U.S. system since 1918. Other credits include credits for certain wage payments, credits for investments in certain types of assets including certain motor vehicles, credits for use of alternative fuels and off-highway vehicle use, natural resource related credits, and others. See, e.g., the earned income credit, 26 USC 32.