NEW YORK (CBS NEWS) – If you’ve ever had to write a check to Uncle Sam in April, you’ve likely become a fan of finding ways to cut your tax bill — and that may have you wondering whether you qualify for any tax credits.READ MORE: Greater Manchester Police Arrest 2 Teens In Connection With Colleyville Synagogue Hostage Standoff
Tax credits are the gold nuggets of the tax world. Qualifying for one feels better than finding $100 in your pants pocket. Here’s a brief look at how some of the most common ones work — maybe you’ll find some cash here, too.
First, be sure you know the difference between a tax deduction and a tax credit. A tax deduction is a dollar amount the IRS allows you to subtract from your adjusted gross income (AGI), making your taxable income lower. The lower your taxable income, the lower your tax bill.READ MORE: 49ers At Cowboys In Tough Wild-Card Matchup
That’s pretty great, but tax credits are even better. They’re dollar-for-dollar reductions in your actual tax bill. A few credits are even refundable, which means that if you owe $250 in taxes but qualify for a $1,000 credit, you’ll get a check for $750. (Most tax credits, however, aren’t refundable.)
Either way, as a simplified example, a $10,000 tax credit makes a much bigger dent in your tax bill than a $10,000 tax deduction does.
Some of the most popular tax credits fall into one of three big categories. These are just summaries; tax credits have lots of rules, so it’s a good idea to consult a tax professional. Your state may offer a variety of tax credits as well.MORE NEWS: Colleyville Rabbi: 'We Are Resilient And We Will Recover'