question archive Which of the following statements regarding tax credits is true? A) Tax credits reduce taxes payable dollar for dollar
Which of the following statements regarding tax credits is true? A) Tax credits reduce taxes payable dollar for dollar
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Which of the following statements regarding tax credits is true?
A) Tax credits reduce taxes payable dollar for dollar.
B) Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate.
C) Tax credits reduce taxable income dollar for dollar
D) None of these statements is true.
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Answer:
Tax credits reduces taxes payable dollar for dollar.
Tax credits provide a dollar-for dollar reduction of your income tax liability. This means that a $1,000 tax credit saves you $1,000 in taxes. On the other hand, tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket.
