What Is Tax Relief?

Tax Relief Explained in Less Than 4 Minutes

Definition
Tax relief is any sort of allowance, often from governments, that reduces someone’s tax liability or improves their tax situation in any other sort of way, such as by delaying filing deadlines.
Person doing tax paperwork on a laptop at the kitchen counter
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Tax relief is any sort of allowance, often from governments, that reduces someone’s tax liability or improves their tax situation in any other sort of way, such as by delaying filing deadlines.

Many types of tax relief exist, such as temporary responses to natural disasters or permanent laws that reduce the burden on certain taxpayers. Learn more about what tax relief programs you may be eligible for so you know when you can reduce your tax liability.

Definition and Examples of Tax Relief

Tax relief can be any sort of allowance that reduces your tax burden. This might be at the federal, local, or state level.

Tax relief is often achieved through new rules that reduce how much you owe in taxes, such as by providing a tax exemption or a tax credit. It may also be done through rules that reduce the difficulty of filing or paying taxes, such as by extending filing and payment deadlines.

  • Alternate definition: Tax relief can also refer to programs that assist you in managing and resolving back tax debts that you owe. The Internal Revenue Service provides these tax relief programs to taxpayers, such as via an offer-in-compromise.

The IRS, for example, often provides federal tax relief when events such as hurricanes or wildfires occur. For example, in the beginning of 2022, the IRS announced tax relief related to wildfires and winds in Colorado. Some of the specifics of this tax relief measure include extending individual and business tax filing and payment deadlines. The tax relief also includes allowances such as letting affected taxpayers deduct property losses if they aren’t covered by reimbursements such as insurance.

Note

Some private companies offer “tax relief” service to help you manage large tax debts. But these companies aren’t always legitimate. It is safer to work out a payment plan directly with the IRS.

How Tax Relief Works

Tax relief can be enacted in a variety of ways. It can happen at the federal, state, or local level, depending on which type of tax is affected. Recent IRS tax relief programs have not required taxpayers to apply for the relief, but, in some cases, an application may be required.

Sometimes, tax relief happens though the passage of a law. The American Taxpayer Relief Act of 2012, for example, made many federal income-tax reductions permanent. In other cases, tax relief occurs through policy decisions made by the IRS, such as disaster declarations from the Federal Emergency Management Administration (FEMA). These policy decisions may or may not be accompanied by federal laws.

Another example of tax relief applies to measures taken in response to the pandemic, such as with the passage of the Tax Relief Act of 2020. In this instance, the federal government provided tax relief by making direct stimulus payments to individuals. These stimulus payments were structured as refundable tax credits. Most taxpayers didn't have to do anything to get this relief; the IRS sent it to them automatically. However, the IRS required some taxpayers who hadn't filed a tax return in the previous two years but should have to file a return in order to get the relief.

Tax relief can also occur at state or local levels. For example, senior citizens in many areas are eligible for some types of tax relief, such as property-tax reductions. This type of tax relief can vary based on income levels.

What Tax Relief Mean for Individual Taxpayers

Knowing about both federal and local tax relief options can help you legally reduce tax liability. However, there can be many nuances to tax relief rules, and it can be hard to stay on top of everything.

To keep track of all the relief options, you may prefer to work with a tax professional. They can help you find and use tax relief measures, such as changing your filing timeline or claiming additional deductions. Most tax preparation software will also be updated to include current forms of tax relief available to you.

Key Takeaways

  • Tax relief means reducing your tax burden, such as by providing tax reductions or filing postponements.
  • Tax relief can happen at the federal, state, or local level.
  • Some tax relief measures are permanent laws, while others apply to temporary situations, such as a natural disaster.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Internal Revenue Service. "Coronavirus Tax Relief." Accessed Feb. 7, 2022.

  2. Internal Revenue Service. "Disaster Assistance and Emergency Relief for Individuals and Businesses." Accessed Feb. 7, 2022.

  3. Federal Trade Commission Consumer Information. "Tax Relief Companies." Accessed Feb. 7, 2022.

  4. Internal Revenue Service. "IRS Announces Tax Relief for Colorado Wildfires and Straight-Line Winds." Accessed Feb. 7, 2022.

  5. Congress.gov. "H.R.8 - American Taxpayer Relief Act of 2012." Accessed Feb. 7, 2022.

  6. Internal Revenue Service. "Tax Relief in Disaster Situations." Accessed Feb. 7, 2022.

  7. Congressional Research Service. "The COVID-Related Tax Relief Act of 2020 and Other COVID-Related Tax Provisions in P.L. 116-260," Page 2. Accessed Feb. 7, 2022.

  8. IRS. "Economic Impact Payments: What You Need To Know." Accessed Feb. 7, 2022.

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