The federal tax laws contains some fairly generous tax credits, for those who are lucky enough (or smart enough) to be able to take advantage of them. The credits can generally be divided into these four categories:

• Credits for certain taxes - credits are permitted to offset the sting of certain taxes, including FICA taxes on tips for food and beverage establishment employees, foreign taxes, a portion of prior alternative minimum tax (AMT) liability, and gasoline taxes paid by farmers or off-highway-vehicle users.
• Credits for activities that benefit disadvantaged or low-income persons - there are a number of credits designed to encourage employment or investment that benefits certain groups: the welfare-to-work credit, the disabled access credit, the empowerment zone employment credit, the Indian employment credit, the low income housing credit, the credit for contributions to Community Development Corporations, and the work opportunity tax credit (formerly known as the targeted jobs credit, which has expired).
• Credits for activities that benefit the environment - currently, the largest group of credits are those for investment in equipment or processes that save energy or protect the environment in some way: the alternative fuels credit, the credit for qualified electric vehicles, the reforestation credit, the energy credit, the alcohol fuel credit, the enhanced oil recovery credit, and the renewable resources electricity production credit.
• Credits for certain other investments - the smallest (and shrinking) group of credits relates to certain investments that are deemed socially beneficial: the rehabilitation credit for old or historic buildings, the orphan drug credit, and the research and development credit.