Dr. Friday explains the key difference between tax credits and tax deductions. While both reduce your taxes, credits are more valuable since they reduce your tax bill dollar for dollar. For example, a $1,000 credit lowers your taxes by $1,000, whereas a $1,000 deduction in a 22% tax bracket only saves you $220. Understanding this distinction can help maximize your tax savings. For personalized tax assistance, reach out to Dr. Friday or tune in to her live call-in show every Saturday.
Transcript:
G’day, I’m Dr. Friday, president of Dr. Friday’s Tax and Financial Firm. To get more info, go to www.drfriday.com. This is a one minute moment.
Many people are always asking me, tax credit, tax deduction. What is the difference? Why do I care if it’s a credit, it’s a deduction, it’s going to reduce my taxes, right? Well, it is. That’s perfectly logical. But the other side of it is a credit is dollar for dollar. So if they say there’s a $1,000 credit, you’re going to reduce your taxes by $1,000. If it’s a deduction, and they say they’re going to deduct $1,000, and you’re at the 22% tax bracket, guess what? You’re going to have a $220 deduction, not a thousand. So deductions are good. Credits are awesome.
You need help with taxes, call me at 615-367-0819. You can catch the Dr. Friday call and show live every Saturday afternoon from 2 to 3pm right here on 99.7 WTN.