Question 20 Sarah is in the 25% income tax bracket. Which of the following statements is true: A $1,000 tax deduction reduces her tax liability by $1,000 while a $1,000 tax credit increases her tax liability by $1,000 A $1,000 tax deduction reduces her tax liability by $1,000 while a $1,000 tax credit reduces her tax liability by $250. A $1,000 tax deduction increases her tax liability by $250 while a $1,000 tax credit increases her tax liability by $1,000 A $1,000 tax deduction reduces her tax liability by $250 while a $1,000 tax credit reduces her tax liability by $1,000