A tax credit is an amount of money that can be subtracted from the amount of taxes you owe.
It’s a way for the government to incentivize certain activities or businesses and is available in different amounts depending on the type of activity or business being incentivized.
Tax credits can either be refundable or nonrefundable. A refundable credit will result in a refund if the amount of your credit exceeds your tax liability, while nonrefundable credits can only reduce your taxable income to zero.