Which of the following statements concerning tax credits is true?

Question

Quizplus · Accepted Answer

Tax credits are generally more beneficial than tax deductions because they reduce taxes payable dollar for dollar, while deductions reduce taxes payable at the marginal tax rate. This means that a tax credit of $1,000 will directly reduce a taxpayer's tax liability by $1,000, while a deduction of $1,000 will reduce the tax liability by the amount multiplied by the taxpayer's marginal tax rate. Therefore, tax credits are usually more valuable to taxpayers.

Which of the Following Statements Concerning Tax Credits Is True