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Tax credits can reduce tax liability dollar for dollar from "summary" of Tax-free Wealth by Tom Wheelwright
When it comes to tax credits, it's important to understand that they work differently from tax deductions. Tax credits are a direct reduction of your tax liability, dollar for dollar. This means that if you have a tax credit of $1,000, it will reduce your tax bill by $1,000. Unlike tax deductions, which reduce the amount of income that is subject to tax, tax credits actually reduce the amount of tax you owe. So, if you owe $5,000 in taxes and you have a $1,000 tax credit, your tax bill will be reduced to $4,000. Tax credits can ...
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