Mint Money Knowledge Center: What is a tax credit?

What is a tax creditWhen it comes to lowering your taxes, it pays to investigate any tax credits that may be available. A tax credit can help you to reduce your tax burden and insure that more of your money stays in your pocket instead of going to the government.
 

What Is A Tax Credit?

According to Investopedia.com, a tax credit is a deduction in federal income tax that is allowed based on your situation. There are personal tax credits and there are corporate tax credits that can help to lower an individual's or company's tax burden. Tax credits apply only to certain situations, such as having dependents living in your home for the majority of the tax year, so it is important to ask a qualified tax accountant about tax credits that may apply to your situation.
 

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How Do Tax Credits Help?

Most tax deductions are used to reduce your taxable income, which can help reduce your tax debt in a small way. But tax credits are applied directly to the tax due, which can increase a refund or lower a tax bill. If the tax credit is significant enough, then it can help to turn your tax bill into a refund that puts money back in your pocket.
 

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