Which one of the following statements is true?
A)Tax credits reduce tax liability at the marginal tax rate.
B)Both tax credits and tax deductions are offsets to taxable income.
C)Dollar for dollar, tax credits are more valuable than tax deductions.
D)The tax impact of an additional dollar of tax base is determined by multiplying by the average tax rate.
E)"I can't afford to earn more because it will throw me into a higher tax bracket and I will keep less than I do now after taxes."

Question

Quizplus · Accepted Answer

Tax credits directly reduce the amount of tax owed, whereas tax deductions reduce taxable income which ultimately reduces the overall tax bill but not as directly as tax credits. Therefore, dollar for dollar, tax credits are more valuable than tax deductions.

Which One of the Following Statements Is True