What is the difference between a deduction and a credit?

The primary difference between a deduction and a credit when it comes to tax law in Arizona is the amount of money that each one will reduce your taxes. A deduction reduces your taxable income, which will in turn reduce the amount of overall taxes you pay. For instance, if you have a standard deduction of $12,200, then any income you make up to that amount is not subject to being taxed. On the other hand, a credit is a direct reduction in the amount of taxes you owe. So, if you owe $5,000 in taxes and you have a tax credit of $1,000, then your taxes will be reduced to $4,000. The amount of the credit does not depend on the amount of income you have, and can be applied to any tax bracket, regardless of your income. In summary, a deduction reduces your taxable income, while a credit is a direct reduction in your taxes owed.

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What is the difference between a deduction and a credit?

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