Tax credits are more valuable than tax deductions.
A tax credit reduces your tax liability dollar-for-dollar.
A tax deduction, on the other hand, reduces your taxable income.
That will also reduce your tax liability, but only by your marginal tax rate.
Let’s say your marginal tax rate is 22%.
A $100 tax credit will reduce your tax liability by $100.
But a $100 tax deduction will reduce your tax liability by just $22, which is your marginal rate times the amount of the deduction.
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