Tax Credits Vs Tax Deductions Nerdwallet

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- Both tax credits and tax deductions decrease what you owe to the IRS, but in different ways. Together, they 're your best sat paying a smaller tax bill.. - A tax deduction is a dollar amount the IRS allows you to subtract from your adjusted gross income AGI , making your taxable income lower. The lower your taxable income, the lower your tax bill. That 's pretty great, but tax credits are even better. They 're dollar-for-dollar reductions in your actual tax bill.. - Congress has approved the most sweeping overhaul of the U.S. tax code in three decades, cutting individual income tax rates and removing a number of breaks and deductions. The plan will become law once President Trump signs it, as he has promised to do. The full bill and supporting materials run to .

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