Tax Credits & Deductions

Credits and deductions can reduce your federal income tax after it’s already been calculated, which makes them a powerful tool for bringing down your tax bill. Learn how to use them to your benefit when you file your taxes.

Credits and Deductions Resources

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The Home Mortgage Interest Tax Deduction for Tax Year 2021
Frequently Asked Questions
  • What’s the difference between a tax credit and deduction?

    Tax credits reduce the amount you owe to the IRS, and tax deductions reduce your taxable income. You can claim both credits and deductions on your tax return, provided that you meet the qualifications for each. Another key difference is you can claim multiple tax credits if you’re eligible, while you can only claim standard or itemized deductions for your filing status.

  • How do health care tax credits work?

    The premium tax credit is a federal refundable tax credit that lowers your monthly premiums on plans from the Health Insurance Marketplace. It was created to provide affordable health insurance to eligible families and individuals with low to moderate incomes.One of the primary qualifications is that your income must fall between 100% and 400% of the poverty line for your household size. 

  • What are pre-tax deductions?

    Pre-tax deductions typically apply to the workplace and are taken from an employee’s paycheck before any taxes are withheld. One example is a flexible spending account (FSA), which is a special pre-tax spending account that many employers provide as an employee benefit. For most taxpayers, using an FSA is the only way to reduce the tax burden on money that you use to pay medical expenses.

Key Terms

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