What are tax credits?

Tax credits are financial incentives provided by the government that reduce the amount of tax owed by an individual or business. They can be either refundable or non-refundable; refundable credits can result in a payment back to the taxpayer if the credit exceeds their tax liability, while non-refundable credits can only reduce tax liability to zero. Tax credits are typically designed to encourage specific behaviors or support certain groups, such as education, healthcare, or renewable energy investments. Overall, they play a crucial role in tax policy and economic support.