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How tax reform impacts deductions and credits: What you need to know

In every post we strive to bring you informative, helpful content that impacts your life in a meaningful way. In today’s post, we will look at how recent tax reform (TCJA)  will impact deductions and credits.

While many aspects of tax law are complicated, deductions and credits are probably two of the most easily recognizable parts. I think most of us know from experience deductions and credits are the “good guys” who reduce tax. What you may not know is they go about reducing taxes in vastly different ways. Credits are a dollar for dollar reduction in our tax liability. Deductions, on the other hand, reduce tax liability by the tax rate multiplied by the deduction. On balance, credits are more desirable than deductions because they directly reduce any tax not reduced by deductions.

In this post, we’ve provided a few visual examples of how tax reform impacts credits and deductions and how this may or may not affect you.