Tax benefits are generally broken into two major categories: tax deductions and tax credits. As you examine programs that could potentially apply to you, it’s a good idea to know the differences in how tax savings can work.
In short, a credit gives you a dollar-for-dollar reduction in the amount of tax you owe. A tax deduction, also sometimes called a tax write-off, provides a smaller benefit by allowing you to deduct a certain amount from your taxable income.
Another consideration with tax deductions is that they won’t do you much good unless you itemize your deductions, which only makes sense for people with a considerable amount of deductible expenses.
View the entire article on nerdwallet.com.
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