Series 22: 2.3.5. Tax Credits

2.3.5.  Tax Credits

A tax deduction is a reduction of the amount of a taxpayer’s gross income subject to taxation. A tax credit is a direct reduction of the amount of income tax owed. Where a tax deduction reduces one’s tax bill in proportion to one’s tax bracket, a tax credit reduces one’s tax liability dollar for dollar.

Example: Dan has gross income of $100,000, putting him in a 24% tax bracket. A 10%