Credits reduce tax, sometimes dollar for dollar. That makes them powerful — and also heavily documented.
Credits versus deductions
A deduction lowers the income your tax is calculated on. A credit reduces the tax itself. That's why a credit is generally worth more than a deduction of the same size.
Refundable and nonrefundable
A nonrefundable credit can reduce tax to zero. A refundable credit can result in a refund beyond the tax owed. Many family and education credits have specific rules for each part.
Documentation matters
Credits involving dependents, education or income levels usually require records: relationship and residency information, tuition statements, and accurate income reporting.
Key takeaways
- Credits reduce tax; deductions reduce taxable income.
- Refundable credits can go beyond zero tax.
- Eligibility usually depends on income, filing status and dependents.
- Documentation is what makes a credit hold up.
Frequently asked questions
That depends on your income, filing status, dependents and specific circumstances. We review eligibility as part of preparing your return.
Yes. Amounts and rules are updated regularly, so current-year rules always apply.
This page provides general information only. Individual tax situations vary and may require additional documents or steps.