Current tax law allows investors to take tax credits for the cost of renovating or rehabilitating older or historic structures and for the construction or rehabilitation of qualified low-income housing. Which of the following statements regarding tax credits is true?

Question

Quizplus · Accepted Answer

A tax credit directly reduces the investor's tax liability by the same dollar amount as the credit. In contrast, a tax deduction reduces the investor's taxable income, but the actual tax savings depend on the individual's tax bracket. Therefore, a $1 tax credit reduces the investor's tax liability by $1.

Current Tax Law Allows Investors to Take Tax Credits for the Cost