Tax credits are generally more valuable than tax deductions because tax credits reduce a taxpayer's gross tax liability dollar for dollar while tax deductions do not.

Question

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Tax credits directly reduce a taxpayer's tax liability, while tax deductions only reduce the taxpayer's taxable income, resulting in a smaller tax liability. Therefore, tax credits are generally more valuable as they provide a larger reduction in taxes owed.

Tax Credits Are Generally More Valuable Than Tax Deductions Because