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Tax Deduction
Tax Bracket
Federal Taxes
Withholding

Tax Credit
Term category: Taxes
In 10 words or less: A dollar-for-dollar reduction in a person's tax liability.

Definition: Tax credits are credits that reduce a person's tax liability by an amount equal to the tax credit.

StockJargon Advice: Tax credits are great because they reduce your tax liability by an amount equal to the tax credit.  This differs from a tax deduction, which just reduces your taxable income.  Here's an example:

Tax deduction = $1000
Tax credit = $1000

Tax Deduction = $1,000 * 25% = $250 in tax savings
Tax credit = $1,000 = $1,000 in tax savings

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