Question

fill in the blank question
a tax
reduces taxable income and a tax
reduces the tax liability dollar for dollar.

Explanation:

In tax terminology, a tax deduction reduces taxable income (by subtracting certain amounts from gross income to get taxable income). A tax credit reduces the tax liability dollar for dollar (as it directly subtracts from the amount of tax owed, unlike a deduction which reduces the income on which tax is calculated).

Answer:

First blank: deduction
Second blank: credit