Conrad and Jill have a taxable income of $63,670. They discovered that they are able to receive a $1,500 tax credit for purchasing an energy-efficient furnace. How will this tax credit affect their taxes?

The tax credit will increase their taxable income by $1,500.

The tax credit is added to the tax owed, not the taxable income.

The tax credit will reduce their taxable income by $1,500.

The tax credit is subtracted from the tax owed, not taxable income.