What are the differences between tax credits and deductions?
An example of an AI chatbot conversation about tax credits vs deductions.
What are the differences between tax credits and deductions?
Tax credits reduce your tax bill dollar for dollar, while deductions lower your taxable income.
Can you give me an example of each?
Sure! A tax credit example is the Earned Income Tax Credit, while a deduction example is the mortgage interest deduction.
Which one is more beneficial?
Generally, tax credits are more beneficial because they directly reduce your tax owed, while deductions only reduce taxable income.
Are there limits on tax credits or deductions?
Yes, some tax credits have income limits, and deductions may have caps based on the type of expense.
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