You see them on your tax forms every year, but you might not understand exactly how tax deductions and tax credits function. Unfortunately, if you’re not using deductions and credits correctly, you could be paying more than necessary. While both tax deductions and credits are both tax write-offs that can reduce your tax bill, these items function differently. Deductions can be subtracted from your taxable income, meaning their value depends on your marginal tax rate. Tax deductions can be itemized or you can take the standard deduction based on your filing status.
Federal tax deductions credits can differ from your state’s write-off opportunities, so it’s important to pay close attention when claiming credits and deductions. To learn more about the tax write-offs available to you, check out a bevy of articles below and learn how you may be able to save more next filing season.