Asked by Tricia
If I have $40,000 of pre-tax what are the differences between $1,000 tax credit versus a $1,000 tax deduction for a single taxpayer in the 25% tax bracket?
Answers
Answered by
Steve
a tax credit reduces your <b>taxes</b> by $1000
a tax deduction reduces your <b>income</b> by $1000. Since you are in the 25% bracket, that reduces your taxes by only $250.
a tax deduction reduces your <b>income</b> by $1000. Since you are in the 25% bracket, that reduces your taxes by only $250.
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