People often ask what is the difference between a tax credit and a tax deduction. These terms are sometimes even used interchangeably. But there is a very distinct difference.
Credits reduce your tax bill directly for the amount of the tax credit. Therefore, if you are qualified to take a $1,000 tax credit, you would actually reduce your tax bill by $1,000.
Deductions, which are completely opposite of credits, only reduce the amount of taxable income by which your tax liability will be calculated. The interpretation of this means that your final tax liability is actually only reduced by your deduction times the tax bracket that you are in.
If you were in a 10% tax bracket and qualified for a $500 tax deduction, you would save $50 on your final tax bill. $500 multiplied by your 10% tax bracket.
Does that make sense? Good. Here are a few common tax credits that will help you save money on your taxes.
Child Care Tax Credit
Here's a tax credit that allows you to save money on your taxes if you paid for childcare for your child or adult dependent. If you did, you will want to check into this because it could be worth up to $3,000 for one dependent and $6,000 for two or more.
Tax Credit for Children
This tax credit is for you if you provided up to 1/2 of the expenses for your dependent during the year. This credit is worth up to $1,000 if you qualify.
Adoption Tax Credit
Adoption provides you with a very big tax credit. Adoption expenses qualify for up to a $13,170 credit for the costs incurred as a result of the adoption process.
Court fees, legal fees, travel costs, and direct costs of the adoption can all be claimed as qualifying expenses for this credit.
Of course there are many more tax credits that you may qualify to take. Search tax credits online to see if you could save even more money.
It is definitely worth your time and effort and will save you money.
Credits reduce your tax bill directly for the amount of the tax credit. Therefore, if you are qualified to take a $1,000 tax credit, you would actually reduce your tax bill by $1,000.
Deductions, which are completely opposite of credits, only reduce the amount of taxable income by which your tax liability will be calculated. The interpretation of this means that your final tax liability is actually only reduced by your deduction times the tax bracket that you are in.
If you were in a 10% tax bracket and qualified for a $500 tax deduction, you would save $50 on your final tax bill. $500 multiplied by your 10% tax bracket.
Does that make sense? Good. Here are a few common tax credits that will help you save money on your taxes.
Child Care Tax Credit
Here's a tax credit that allows you to save money on your taxes if you paid for childcare for your child or adult dependent. If you did, you will want to check into this because it could be worth up to $3,000 for one dependent and $6,000 for two or more.
Tax Credit for Children
This tax credit is for you if you provided up to 1/2 of the expenses for your dependent during the year. This credit is worth up to $1,000 if you qualify.
Adoption Tax Credit
Adoption provides you with a very big tax credit. Adoption expenses qualify for up to a $13,170 credit for the costs incurred as a result of the adoption process.
Court fees, legal fees, travel costs, and direct costs of the adoption can all be claimed as qualifying expenses for this credit.
Of course there are many more tax credits that you may qualify to take. Search tax credits online to see if you could save even more money.
It is definitely worth your time and effort and will save you money.
About the Author:
Visit TaxCreditsOnline.Net and look at what othertax credits may be taken by you. Let Tomas Sangold show you and walk you through how to keep more of your money in your pocket.