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Tax Credit

A tax credit is a benefit that a taxpayer can qualify for on their tax return that is similar to a tax deduction. The difference is that a tax credit will increase a truck driver's tax refund or decrease the trucker's tax liability by the listed amount of tax credit, while a tax deduction is subject to the truck driver's tax bracket.

Because a tax credit is a dollar-for-dollar conversion, a $5000 tax credit reduces a taxpayer's tax liability by $5000, a $10,000 tax credit reduces the tax liability by $10,000.  It does not depend on the tax bracket, though it can be affected by the AMT (alternative minimum tax).

Examples of tax credits are: Credit for child and dependent care expenses, credit for the elderly or disabled, education credit, etc.

Tax credits can and often do change from year-to-year. Therefore, reference publication 1040 or consult a tax preparer about the current tax credit changes for each given year.

Some examples of tax credits include:

  • The Hope and Lifetime Learning education credits

  • The Earned Income Credit

  • The Child Tax Credit

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