Tax credits reduce your taxes on a dollar-for-dollar basis.

Name: Tax credits reduce your taxes on a dollar-for-dollar basis.
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Tax credits directly reduce your taxes on a dollar-for-dollar basis. For example, if you have a tax credit of $1,000, your tax liability will be reduced by $1,000. This is different from a tax deduction, which reduces your taxable income and ultimately leads to a lower tax liability.

Tax Credits Reduce Your Taxes on a Dollar-For-Dollar Basis