Tax credit

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A tax credit is an amount returned to you from taxes paid word correctly deducted from the amount of taxes owed. The government uses tax credits to encourage civic actions by individuals and corporations. For example, in 2009 in 2010 there are tax credits for making your home more efficient. The government will give you a 30% tax credit for amounts spent on high-efficiency windows, better insulation and high efficiency air conditioners and heaters.

A tax credit is similar to a tax deduction, but where a tax credit reduces the amount you owe dollar for dollar, a tax deduction reduces the amount on which your tax is based. So, assuming you pay 30% income tax, a tax deduction of $100 saves you $30. A tax credit of $100 saves you $100.