What’s the difference between a tax credit a tax deduction?
As a tax credit applies against the taxpayer’s liability, a tax deduction applies against a taxpayer’s income, lowering the adjusted gross income and possibly moving the taxpayer to a lower bracket. Tax credits have a greater benefit to a taxpayer. With a tax credit, if the taxpayer owes $2000 in taxes, their liability is reduced to $500. If they owe nothing, they can expect a $1500 refund.
