Tax-credit meaning

A credit against tax owed. Tax credits are subtracted from the tax owed, unlike tax deductions, which are subtracted from taxable income. Tax credits allow the government to encourage certain behaviors. Examples of tax credits are those that are allowed for people with disabilities, child care expenses, and the costs of adopting a child.
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An amount counted directly dollar-for-dollar to reduce one’s tax liability, rather than a reduction in gross income. See also tax deduction.
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A credit allowed for investments in personal property that is exclusively used for business or is income-producing (applicable through tax years before 1986).
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