A key difference between a deduction and a credit is the way they affect your taxable income.

A key difference between a deduction and a credit is the way they affect your taxable income. When you claim a deduction, it reduces the amount of your income that is subject to tax. On the other hand, a credit directly reduces the amount of tax you owe. Deductions are generally based on eligible expenses or contributions, while credits are often tied to specific circumstances or qualifications. Understanding this distinction is crucial for effective tax planning. In conclusion, deductions lower your taxable income, while credits directly reduce your tax liability. For more information on this topic, visit Everfi.com