tax credit

A tax credit is an amount that eligible taxpayers can subtract from their taxes owed based on certain criteria determined by the IRS. It is a dollar for dollar reduction in taxes owed. If your total taxes owed was $5,000 a $500 tax credit would reduce what you owe to $4,500.
Tax credits generally cover expenses you paid throughout the year and have eligibility requirements you must satisfy before you can claim them. Some tax credits can result in a refund (refundable credits)  but most can only bring your tax liability down to zero (non-refundable credits). Credits are usually designed to encourage certain types of behavior that are considered beneficial. Some of the most common are credits for childcare and secondary education tuition.