Tax credits are a valuable financial tool that can reduce the amount of taxes you owe. They are different from deductions, which reduce your taxable income. Tax credits are subtracted directly from the taxes you owe, dollar for dollar. This means that a tax credit of $100 will save you $100 on your taxes.
There are many different types of tax credits available, including the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the American Opportunity Tax Credit (AOTC). Each tax credit has its own eligibility requirements and rules. To find out if you qualify for a tax credit, you can use the IRS’s Interactive Tax Assistant tool.