Which of the following statements concerning tax credits is true?

Question

Quizplus · Accepted Answer

Tax credits provide a dollar-for-dollar reduction in a taxpayer's tax liability, whereas tax deductions only reduce taxable income. Therefore, tax credits are generally more beneficial than tax deductions. Additionally, tax credits can also be refundable, meaning that if the credit exceeds the taxpayer's tax liability, the taxpayer can receive the excess as a refund. The tax benefit a taxpayer receives from a credit is not dependent on their marginal tax rate.

Which of the Following Statements Concerning Tax Credits Is True