Which of the following statements regarding tax credits is true?
A)Tax credits reduce taxable income dollar for dollar.
B)Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate.
C)Tax credits reduce taxes payable dollar for dollar.
D)None of these statements is true.

Question

Quizplus · Accepted Answer

Tax credits directly reduce the amount of tax owed, not taxable income. Therefore, option A is incorrect. Tax credits provide the same amount of tax benefit regardless of the taxpayer's marginal tax rate, making option B incorrect. Option C is correct as tax credits reduce taxes payable dollar for dollar.

Which of the Following Statements Regarding Tax Credits Is True