A tax credit is a dollar-for-dollar tax deduction from your actual tax liability. Credits are much better than a deduction, since a deduction is considered an "above-the-line" income reduction (lines 23-36 on Form 1040), whereas, a credit is "below-the-line" (the "line" being adjusted gross income) and applied directly to offset your actual tax liability.
While there are over twenty tax credits currently available, some of the more common tax credits include the following:
- Child tax credit
- Earned income credit
- Residential energy tax credit
- Mortgage interest credit
- Adoption credit
- Child and dependent care credit
- Retirement savings contribution credit
- Prior-year AMT credit
- Education credits
- Elderly and disabled credit
Payment of Tax
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