A tax credit is an amount of money that taxpayers can subtract directly from the taxes they owe to the government. Unlike deductions, which reduce taxable income, tax credits lower the actual tax bill. This means that if you qualify for a tax credit, you pay less in taxes, making it a valuable benefit for individuals and families. There are various types of tax credits, including those for education, childcare, and energy-efficient home improvements. Some credits are refundable, meaning you can receive a refund if the credit exceeds your tax liability, while others are non-refundable, which means they can only reduce your tax bill to zero.