A tax credit and a tax rebate are both forms of tax relief, but they have distinct differences:
Overall, the key distinction is that tax credits directly reduce the tax liability owed, while tax rebates are refunds of overpaid taxes.
A tax credit reduces the total amount of tax owed, while a tax rebate is a refund of overpaid taxes. Tax credits are deducted from the tax liability dollar for dollar, while tax rebates are given when an individual or business has overpaid their taxes. Tax credits can be refundable or non-refundable, with refundable credits potentially resulting in a refund if the credit amount exceeds the tax liability. Tax rebates, on the other hand, are typically not directly related to specific deductions or credits and are often provided as a lump sum payment or a reduction in future tax obligations.