Tax credits are more valuable than deductions — they reduce your tax bill dollar-for-dollar, not just your taxable income.
A $1,000 deduction saves you $1,000 × your marginal tax rate (e.g., $220 if you're in the 22% bracket). A $1,000 credit saves you the full $1,000 — much more valuable.
| Credit | What it covers |
|---|---|
| Child Tax Credit | Up to $2,000 per qualifying child under 17, partially refundable |
| Earned Income Tax Credit (EITC) | For low-to-moderate income workers, amount varies by income and number of children |
| American Opportunity Credit | Up to $2,500/year for the first 4 years of higher education |
| Lifetime Learning Credit | Up to $2,000/year for any level of post-secondary education |
| Child and Dependent Care Credit | For childcare costs enabling you to work |
| Saver's Credit | For low-to-moderate income retirement contributions |
A refundable credit can reduce your tax below zero, generating a refund (like EITC). A non-refundable credit can only reduce your tax to zero — any excess is lost (unless it can be carried forward, like some education credits).
Credit eligibility depends on income phase-outs and other specific requirements. Tax software or a CPA can help identify every credit you qualify for.