When it comes to taxes, it's important to understand the difference between tax credits and deductions.

Tax Deductions: Deductions are amounts that are subtracted from your income before your tax liability is calculated. They reduce the amount of your income that is subject to taxation. For example, if you earn $50,000 and have $5,000 in deductions, you would only be taxed on $45,000 of income.

Common deductions include mortgage interest, charitable contributions, and certain medical expenses.

Tax Credits: Tax credits, on the other hand, are direct reductions of the amount of tax you owe. They can be more valuable than deductions because they directly reduce your tax bill, dollar for dollar. For example, a $1,000 tax credit reduces your tax bill by $1,000.

Examples of tax credits include the Child Tax Credit, the Earned Income Tax Credit, and education-related credits.

It's important to take advantage of both deductions and credits to minimize your tax liability. While deductions reduce the amount of income subject to tax, tax credits directly reduce the amount of tax owed.

Understanding these differences can help you make informed decisions when it comes to tax planning and filing.