GAO Glossary of Terms and Definitions (September 2005)

Tax Credit

An amount that offsets or reduces tax liability. When the allowable tax credit amount exceeds the tax liability and the difference is paid to the taxpayer, the credit is considered refundable and is considered an increase in outlays in the federal budget. Otherwise, the difference can be (1) allowed as a carryforward against future tax liability, (2) allowed as a carryback against taxes paid, or (3) lost as a tax benefit. (See also Tax Expenditure.)

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