Question

What is the difference between tax credits and tax deductions?

Answer 1

Answer:

Tax credits reduce the amount of income tax, a person owes to the federal and state governments. It is a type of tax incentive that is subtracted from the total tax he has to pay.

Tax deductions are certain deductions that a person can get in order to lower his tax liability. These deductions are in the form of expenses from the whole year, like insurance premiums or any form of charity etc. These expenses are subtracted from the gross income to get the amount of tax owed.

Answer 2

A tax credit is where you get money back and tax deductions is where they take things off