Loading…
CPA · Tax · Advisory
Tax deductions and tax credits are different tax benefits. A deduction reduces taxable income, while a credit reduces the tax owed. They are not forms of income, and their effect on your return depends on the rules for the particular deduction or credit.
A deduction reduces the amount of income subject to tax. The tax savings depend on the applicable tax rates and other circumstances. Taxpayers generally choose between the standard deduction and itemizing eligible deductions, subject to the rules for their filing situation.
A tax credit reduces the tax you owe, usually dollar for dollar. A nonrefundable credit can reduce the tax bill to zero but generally does not produce a refund for an unused amount. A refundable credit can produce a refund even when no tax is owed, subject to its eligibility rules and limits. Different credits have different income limits, phaseouts, and refundability rules.
*Disclaimer: The views expressed here are those of the authors and do not necessarily represent or reflect the views of Suncoast CPA Group*
Same team, same standard — explore the other services we offer nearby.
Drop your details and a member of our team will reach back within one business day. For urgent matters, call the office near you.
Suncoast CPA Group
We respond same business day during tax season.
