This post includes affiliate links.  This means that a special tracking code is used and I will receive a commission at no cost to you. This supports my family so I can provide you with great content. 

Tomato – Taomato ? Nope, not here. I always hear folks using these terms interchangeably.  However, tax credits and tax deductions have two completely different meanings.  Both are great and can definitely help reduce tax but in different ways. 

Tax Deductions

Reduces your taxable income. There are two types of deductions –> the standard deduction or itemized deductions.  Check out my full guide –  to see if you should itemize your deductions or take the standard deduction.

TurboTax Deluxe Edition searches for more than 350 tax deductions and credits. Start today.

Tax Credits

Reduces your tax liability (the amount you owe). There are several tax credits available to qualifying taxpayers. For example check out all the changes to the Child Tax Credit. There are also credits available for childcare, adoption, low income and college expenses.   

Check out this full list from the IRS of available tax credits. 

Limited Time Offer: Save $20 on TurboTax Deluxe, now only $39.99. Start Now!

Refundable v. Nonrefundable 

Refundable -> means if the tax credit reduces your tax liability to a negative amount you can receive a refund. Yeah! 

Nonrefundable -> means if the tax credit reduces your tax liability to a negative amount you do not receive a refund. So you may not get the full value of the credit if your tax liability is not high enough. Boo!

Click here to use TurboTax Calculators and Tools. Estimate your refund and more.

That’s it. Pretty easy peasy right?!

30% Off with this link

I’d love to help you get a better understanding of other tax terminology ->  grab a free copy of my tax cheat sheets! 

Get my tax CHEAT SHEETS for individuals and businesses for free

These cheat sheets will help you gain confidence with your tax obligations. Get it now:

This blog is for informational purposes only. This is not intended to be personalized tax, legal or accounting advice.  You should always receive tax advice from someone who is familiar with your unique situation