When it comes to filing our taxes, we've all
heard of credits and deductions. But do you know what the difference is?
- Deductions are subtracted from your income before you calculate the amount of
tax you owe.
- Credits are subtracted from the amount of tax you owe.
Deductions for individuals can be related to work, investments, education, health care, and of course itemized and miscellaneous deductions, some of which are property tax, charitable contributions, interest expense, moving expense, alimony, and disaster losses.
There are two types of tax credits: nonrefundable and refundable.
Deductions for individuals can be related to work, investments, education, health care, and of course itemized and miscellaneous deductions, some of which are property tax, charitable contributions, interest expense, moving expense, alimony, and disaster losses.
There are two types of tax credits: nonrefundable and refundable.
- A
nonrefundable tax credit means you get a refund only up to the amount you owe
for taxes.
- A refundable tax credit means you get a refund even if it is more
than what you owe.
Credits for individuals can be related to family and dependents, health care, income and savings, education, and home ownership.
To read more about credits and deductions for individuals, check out this informative IRS page. For information on credits and deductions for businesses, read here.
To read more about credits and deductions for individuals, check out this informative IRS page. For information on credits and deductions for businesses, read here.
