Tax Credit
An amount subtracted directly from the tax owed. Examples include a child tax credit, a child or dependent care credit, and an education credit.
Credit cuts the bill, deduction cuts the income.
Often Confused With
- Tax Deduction
- A deduction shrinks the income a rate is applied to; a credit subtracts straight from the tax owed, so a dollar of credit is worth more.
Taught In
See Also
5.1.B.4