Don’t worry about it since it’s a Youtube video “Tax Deductions and. Tax Credits” can help clear up an extremely common confusion for taxpayers. You’ll be able to find out more is available!
Tax deductions can reduce your tax-deductible income However, tax credits may lower the amount of cash you must pay. Even though it sounds like a lot of different things, the reality is it’s the case. The best way to describe it is using an instance.
If your tax-deductible income per year is $14,000. If your tax rate is 10%, you owe the federal government $1,400. We need to subtract $500. What changes will that bring about? Like we said before, a tax deduction reduces the amount of income you are tax deductible, therefore today, the government is able to only tax you up to $13,500. For a tax at a 10% rate, you’ll pay $1,350.
Take a look at a tax credit for 500. Still, you have $14,000 tax-deductible income, however you’ll only have to pay $1,400. It is possible to reduce your tax-deductible earnings by using the tax credit. You now owe just $900
For additional information on tax credits, you can go through the entire video.