Although tax is not actually deducted from certain types of income, you may be given a tax credit as if tax had actually been deducted. For example, you are given a lower rate tax credit on dividends you receive. The dividend you receive being treated as the net amount (after deduction of the tax credit).
A dollar-for-dollar reduction in the amount of taxes owed. Under certain conditions tax credits are allowed for low-income people over 65, individuals with disabilities, income tax paid to a foreign country, child care expenses, adoption costs, rehabilitation of historic properties, research and development, building low income housing, and providing jobs for economically disadvantaged people.