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Deductions vs. Credits on Your Tax Return

Now that tax season is in full swing and we are all preparing our tax return, you are probably seeing the words deductions and credits. What are they and how do they work?

Simply put, deductions lower your taxable income and credits lower the tax you owe. That’s seems simple enough, right? Not really. Let’s see an example:

Make sense now? If you want to understand your tax return, I love teaching people how to ‘read’ their own tax returns so that they understand what is going on.

Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

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