Credit

A tax credit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the  It may also be a credit granted in recognition of taxes already paid or, as in the United Kingdom, a form of state support for low earners. Incentive tax credits may be used to encourage behaviors like investment or parenting. A credit directly reduces tax bills, unlike tax deductions and tax exemptions, which indirectly reduce tax bills by reducing the size of the base (for example, a taxpayer's income or property value) from which the tax bill is calculated. Most tax credits are nonrefundable tax credits and so do not apply if no taxes are owed. However, some tax credits are refundable tax credits so if the credit exceeds the amount of taxes owed, the excess is returned to the taxpayer. Individual income tax credits Income tax systems often grant a var...