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This is a post by BargainBabe.com writer Yazmin Cruz.
Tax season is upon us and if you are contemplating doing your taxes to save money, think again. Doing your own taxes may not save you money, especially if you don’t know the difference between a tax credit and a tax deduction. Here’s how to find out if you should be doing you taxes or paying someone else to do them for you.
Consider this: If the time and money you spend doing your taxes costs more than hiring a professional, then (more…)
A college student can be worth $2,500 under the American Opportunity Credit.
Last week I wrote about three educational and energy credits that reduce your taxes. I mentioned one deduction, too. So what’s the difference between a tax credit and a tax deduction?
A tax credit directly reduces the taxes you owe. So if you do your taxes and owe Uncle Sam $5,000, a $2,500 tax credit means you pay just $2,500 in taxes.
A tax deduction reduces your taxable income, which is what determines how much tax you pay. So if your gross income was $45,000, a $2,000 tax deduction means you pay taxes on $43,000.
In short, a tax credit saves you a lot more money than a tax deduction, so never skip a chance to claim a valid tax credit. Got questions? Leave a comment and I’ll do my best to answer.
