State Tax Credits

State tax credits are reductions in the amount of state income tax you owe. They are different from deductions because credits directly decrease your tax liability dollar-for-dollar. For example, if you owe $1,000 in state taxes and qualify for a $200 credit, your owed amount drops to $800. States offer various credits to promote certain behaviors or support specific groups, such as renewable energy investments, education expenses, or low-income households. These credits can make paying state taxes more affordable and encourage activities that benefit the community or environment.