Other forms: tax credits
When you finish your taxes, you often brace for the total amount owed, but sometimes you discover that you qualify for a tax credit — a set amount subtracted directly from your tax bill.
Unlike a tax deduction, which reduces your taxable income before taxes are calculated, a tax credit reduces the tax bill itself. That difference can make a tax credit feel like a welcome reward tucked inside a stack of forms. In Britain, the phrase can also refer to a government benefit paid to people with lower incomes. The term has been around since the 1940s, showing that tax vocabulary can have at least a little good news in it.