Question

What is the fundamental difference between a tax credit and a tax deduction in how they affect a person's tax liability?

(1 point)

A tax deduction provides a dollar-for-dollar reduction in taxes owed, making it more valuable than a credit.

A tax credit increases your total taxable income, while a deduction directly increases your tax refund amount.

A tax deduction and a tax credit are interchangeable terms for any action that lowers your overall tax burden.

A tax credit directly reduces the final amount of tax owed, while a deduction only lowers taxable income.

Answer 1

A tax credit directly reduces the final amount of tax owed, while a deduction only lowers taxable income.