Tax Deductions vs. Tax Credits: What's the Difference?

A tax deduction reduces your taxable income, while a tax credit reduces your actual tax bill dollar for dollar, and that distinction matters a lot. In this episode, Ryan uses a simple flat-rate example to show the real difference: a $5,000 deduction at a 20 percent tax rate saves you $1,000, while a $5,000 tax credit saves you the full $5,000.Aaron shares a personal story about donating a car and discovering the hard way that a $500 deduction is not the same as $500 back in your pocket. Ryan and Aaron walk through why credits are significantly more valuable than deductions of the same size, and what that means when you are making financial decisions that might qualify for either. This is education, not personal advice, so work with a CPA on your specific tax situation.Find "Your Fiscal Physical" the book on AmazonIf you have suggestions or feedback, please email us at: [email protected], as always, Stay the Course!