Tax Credits

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A tax credit is a monetary amount that can be deducted from a taxpayer's tax burden. Tax credits are superior to tax deductions because the latter reduces taxable income whereas the former reduces tax liability.

Tax credits are divided into three categories:

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Non-refundable

A non-refundable tax credit reduces the amount of tax payable to zero but does not result in a tax refund.

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Refundable

This is considered to be the best type of tax credit because it is fully refundable.

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Partially refundable

A partially refundable tax credit is one that is refundable up to a particular amount.