what is the difference between a tax credit and a tax deduction 
tax credits and tax deductions both reduce the amount of tax you owe but they work in different ways tax credits directly lower the amount of tax you owe while tax deductions decrease your taxable income say you re eligible for a 1 000 tax credit and a 1 000 tax deduction the tax credit reduces your tax bill by 1 000 so if you owed 1 500 in taxes and then took a 1 000 credit your tax bill would be 500 1 500 1 000 on the other hand the tax deduction reduces your taxable income by 1 000 so if you fall into the 22 tax bracket the 1 000 deduction would save you 220 1 000 22 tax credits are more favorable because they save you more money than tax deductions 