One of the most common misunderstandings in tax filing is the difference between tax deductions and tax credits. While both help reduce what you owe, they work in distinct ways.
Tax Deductions lower your taxable income before your tax is calculated. For instance, when filing an individual return, you can either claim the standard deduction or itemize deductions, depending on which reduces your taxable income the most.
Tax Credits reduce your tax bill dollar-for-dollar, often making them more valuable than deductions. Some, like the Child Tax Credit, are even refundable, meaning if the credit exceeds the tax owed, you could receive the difference as a refund.
Knowing how to optimize these benefits can make a significant difference in your tax outcome. Let Verity CPAs ensure you’re getting every deduction and credit you’re entitled to. Contact us at info@verity.cpa or 808.546.5026 today!
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