A dollar-for-dollar reduction in tax owed — far more valuable than a deduction of the same size.
A $1,000 deduction saves you your marginal rate (e.g., $220 at 22%); a $1,000 credit saves the full $1,000. Common credits: Child Tax Credit, Earned Income Tax Credit, education credits.
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FAQ
What is Tax Credit in simple terms?
A $1,000 deduction saves you your marginal rate (e.g., $220 at 22%); a $1,000 credit saves the full $1,000. Common credits: Child Tax Credit, Earned Income Tax Credit, education credits.