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Start filingWhat is a Tax Credit?
Unlike tax deductions, which reduce the amount of income to be taxed, tax credits reduce your actual tax liability—also known to as your “tax bill.” In general, a $200 credit is worth more than a $200 deduction. Both provide tax breaks, but credits go farther by design. If you don’t have a tax bill, some credits can even lead to a refund. These are known as “refundable credits,” and the three most common are the Earned Income Credit, the Child Tax Credit, and the American Opportunity Tax Credit.
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