What is the difference between a deduction and a credit?

A deduction and a credit are both forms of reducing the amount of tax you owe. The difference between a deduction and a credit is that a deduction reduces your taxable income and a credit reduces the amount of tax you owe after you have already calculated your taxable income. A deduction lowers your overall taxable income, which reduces the amount of tax you owe. Deductions are generally taken as a percentage of your total income. For example, in Washington, you may be able to take a deduction of up to 6% of your total income. The more deductions you can take, the lower your taxable income will be and the less tax you owe. On the other hand, a credit reduces the amount of tax you owe after you have calculated your taxable income. A credit is deducted directly from the amount of tax due and can be used to reduce the amount of tax you owe. For example, you may be able to receive a Child Tax Credit in Washington if you qualify and this credit can be used to reduce the amount of tax you owe. In summary, a deduction reduces your taxable income, while a credit reduces the amount of tax you owe after you have already calculated your taxable income. Both a deduction and a credit can help to reduce the amount of tax you owe and can save you a significant amount of money.

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What is the difference between a deduction and a credit?

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