Tax Credit Verses a Tax Deduction

Basically, a Tax Credit is worth more that a Tax Deduction

  • A tax credit lowers your tax bill dollar for dollar.
  • A deduction shaves money off your taxable income, so the value depends on your tax bracket.  So, how much you get back with a deduction, depends on your tax bill.

DEDUCTION _-If you’re in the 25% bracket, a $1,000 deduction lowers your tax bill by $250.

CREDIT – But a $1,000 credit lowers the bill by the full $1,000, no matter in which bracket you are.

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