Tax credits are items that help reduce the tax owed by a taxpayer. It is considered to be a dollar for dollar reduction of the tax owed. Tax credits and tax deductions are different in that tax credits are not contingent upon a taxpayer’s tax bracket. If the tax credits exceed the tax liability, then a taxpayer can receive a tax refund. If not, then a taxpayer will have a tax liability. Tax credits are split into two different categories: personal and refundable credits.
