What is the difference between tax deductions and tax credits?
An example of an AI chatbot conversation about tax deductions and tax credits.
What is the difference between tax deductions and tax credits?
Tax deductions reduce your taxable income, while tax credits reduce your tax bill directly.
Can you give me an example of each?
Sure! A tax deduction might be mortgage interest, while a tax credit could be the Earned Income Tax Credit.
Which one is more beneficial?
It depends on your financial situation. Tax credits are generally more beneficial as they reduce your tax bill dollar for dollar.
Are there limits on how much I can claim for deductions or credits?
Yes, there are limits for both. Deductions can vary based on your income and filing status, while credits may have specific eligibility requirements.
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