what is the difference between a tax credit and a tax deduction?\na. a tax credit represents money owed to…

what is the difference between a tax credit and a tax deduction?\na. a tax credit represents money owed to you, while a tax deduction represents money you owe.\nb. a tax credit reduces the amount of money you must pay, while a tax deduction reduces your taxable income.\nc. a tax credit is owed money that collects interest, while a tax deduction is money that you do not have to pay.\nd. a tax credit occurs if you underpaid during the year, and a tax deduction occurs if you overpaid.\nplease select the best answer from the choices provided

what is the difference between a tax credit and a tax deduction?\na. a tax credit represents money owed to you, while a tax deduction represents money you owe.\nb. a tax credit reduces the amount of money you must pay, while a tax deduction reduces your taxable income.\nc. a tax credit is owed money that collects interest, while a tax deduction is money that you do not have to pay.\nd. a tax credit occurs if you underpaid during the year, and a tax deduction occurs if you overpaid.\nplease select the best answer from the choices provided

Answer

Brief Explanations:

A tax credit directly reduces the amount of tax owed. For example, if you owe $1000 in taxes and have a $200 tax - credit, you only pay $800. A tax deduction, on the other hand, reduces your taxable income. Suppose your income is $50000 and you have a $5000 tax - deduction. Your taxable income becomes $45000, and then the tax is calculated based on $45000.

Answer:

B. A tax credit reduces the amount of money you must pay, while a tax deduction reduces your taxable income.