Asked by Melissa Plata on Apr 27, 2024
Verified
What is the difference between a tax credit and a tax deduction?
Tax Credit
A direct reduction in tax liability, not merely a reduction in taxable income, that can decrease the amount of taxes owed.
Tax Deduction
A reduction in taxable income for certain expenses, allowing individuals or entities to pay less tax.
- Describe the differences between tax credits and tax deductions and their impact on tax liability.
Verified Answer
AK
Audrey KalinApr 29, 2024
Final Answer :
Tax credits are subtracted from your tax after you look up the tax owed on a tax table.Deductions are subtracted from your taxable income before you look up the tax you owe on a tax table.
Learning Objectives
- Describe the differences between tax credits and tax deductions and their impact on tax liability.