tax credit (redirected from Tax credits)

Tax Credit

A dollar-for-dollar reduction in the tax payment required from a person.

Notes:

Deductions and exemptions only reduce the amount of your income that is taxable. Tax credits reduce the actual amount of tax owed.

See also: Credit, Deduction, Exemption

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Tax credit

A direct dollar-for-dollar reduction in tax allowed for expenses such as child care and R&D for building low-income housing. Compare tax deduction.

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tax credit

A reduction in the amount of taxes owed. For example, corporations are permitted a credit on U.S. taxes for taxes paid to foreign governments, and individuals could, for a number of years, claim a tax credit for a portion of expenditures for certain energy-saving home improvements. A tax credit is more valuable than a deduction of an equal amount because the credit results in a reduction in tax owed rather than a reduction in taxable income. See also foreign tax credit.