Taxpayers with lower marginal rates benefit more from tax deductions than do those in higher brackets, while credits provide equal benefits to all taxpayers.

Question

Quizplus · Accepted Answer

Taxpayers in higher marginal tax brackets benefit more from deductions because deductions reduce taxable income, and the value of the deduction increases with the taxpayer's marginal tax rate. Tax credits provide a dollar-for-dollar reduction in tax liability, offering equal benefits to all taxpayers regardless of their marginal tax rates.

Taxpayers with Lower Marginal Rates Benefit More from Tax Deductions