💰 CPA Exam Prep

A tax credit differs from a tax deduction because:

A Credits reduce taxable income
B Credits directly reduce the tax liability dollar-for-dollar, while deductions reduce taxable income
C Deductions are always better
D There is no difference

✓ Correct Answer: Option B

Credits reduce tax owed directly ($1 credit = $1 less tax). Deductions reduce taxable income (value depends on tax bracket).

Related CPA Exam Prep Questions