Tax credits versus tax deductions ~ Saving with the Stimulus

In general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar for dollar. Tax deductions such as those for home mortgages and charitable giving lower your taxable income. If you are in the 35 percent tax bracket, the income tax you pay is reduced by 35 percent of the value of a tax deduction. A tax credit reduces your federal income tax by 100 percent of the amount of the credit.

*** Be sure to consult a tax professional if you have questions regarding tax credits and tax deductions.

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