Tax Credits vs. Deductions: How They're Different and What They'll Do for You

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Tax Credits vs. Deductions: How They're Different and What They'll Do for You

^{Published on 2025-03-31 12:44:00 - CNET}

There are about two weeks left in the 2025 tax season, so you might want to get a move on. Even if you've only dipped a toe into the filing process, you might already be considering which credits and deductions you qualify for.

The article from MSN Money discusses the differences between tax credits and tax deductions, explaining how each can benefit taxpayers differently. Tax credits directly reduce the amount of tax you owe, dollar for dollar, making them generally more valuable than deductions. For example, a $1,000 tax credit reduces your tax bill by $1,000. On the other hand, tax deductions lower your taxable income, which indirectly reduces your tax liability by the percentage of your highest tax bracket. For instance, if you're in the 22% tax bracket, a $1,000 deduction would save you $220 in taxes. The article highlights various types of credits like the Child Tax Credit, Earned Income Tax Credit, and education credits, which can significantly decrease tax liability or even result in refunds. Deductions include common ones like mortgage interest, charitable contributions, and medical expenses, which might not be as immediately impactful but still offer savings. Understanding these can help taxpayers maximize their returns or minimize their tax payments.

Read the Full CNET Article at:
[ https://www.msn.com/en-us/money/taxes/tax-credits-vs-deductions-how-they-re-different-and-what-they-ll-do-for-you/ar-AA1BZWba ]

N@N

Tax Credits vs. Deductions: How They're Different and What They'll Do for You