Tax credits and tax deductions both help at tax time—but they work differently. Learn how deductions reduce taxable income, how credits reduce your tax bill, and why understanding the difference can lead to real savings.Want a second set of eyes on your tax planning opportunities? Visit elevate-wealth.com and click Let’s Talk.#Taxes #TaxPlanning #ElevateWealthAdvisory

Credit or deduction? What's the difference and which helps more? Today on Elevate Wealth. Welcome to Elevate Wealth. This is Jose Colmenarez with our president and CEO, Deanne Rosso. Welcome, Deanne. Hello, Jose. Good to see you. Deanne, set the table for us. How do deduction and credits work side by side? Oh, great question. So, deductions and credits obviously both help on the tax return, but they're a little bit different. Deductions reduce taxable income. So deductions are things that after you add up all of your income and you apply a deduction to that, it would reduce your income for what you pay tax on. A credit, on the other hand, is going to actually reduce your tax bill. So a $1,000 credit, for example, would be $1,000 against what you actually owe. So they're both helpful. And then there's two types of credits. There's non-refundable, which means that let's say that you owe $500 in tax and you get a $500 credit. That could reduce your tax liability to zero. Or there's refundable. Let's say you owe $500 and you get $1,000 credit. That means you could actually be negative $500 and get a refund of $500. So, how do I know what I qualify for? Yeah, you've got to read the eligibility rules carefully or, you know, look them up, search for them, figure out what applies to you. And as taxpayers, that's our responsibility is to figure out which deductions or credits apply to our scenario. So those things depend a lot of times on your income limits, your age, enrollment requirements, filing statuses. So there's lots of different things that deductions or credits could apply to. And so you just have to kind of do your research. And you know, the tip here is don't leave those things on the table, particularly credits. If you ever wonder why your accountant or your CPA or the tax prep program you use asks you a million questions, that's why. It's trying to help you figure out what you qualify for. That's really helpful, Deanne. Credits and deductions can sound similar, but they work very different. And choosing the right one makes a big impact. If you're not sure what you may qualify for and how income limits come into play, we're here to help you think it through. Visit elevate-wealth.com and click let's talk. See you next time.