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Credits vs. Deductions: What's the Difference?

  Broadcast in Legal

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When faced with the ominous 1040 every year during tax season, some taxpayers just sign on the dotted line, while others are curious about the calculations.  If your one of those tax payers trying to find out how your tax bill is calculated and why credits and deductions impact the bottom line, you have come to the right place.

If a taxpayer qualifies to use either a tax credit or deduction they will most likely see a change in their taxable income. A tax credit will often lower a taxpayers tax bill dollar for dollar, no matter which tax bracket you are in.  However a deduction will take money off of your taxable income and then deduction will depend on your tax bracket.

It is also important to know about the different credits and deductions how they affect  the taxpayer. 

Tags:
American Opportunity Credit
EIC
Tuition
Hope Credit
Child Tax Credit
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