Tax credits are dollar-for-dollar amounts that you can deduct from the taxes you owe. Tax credits are further broken down into 2 categories—refundable and non-refundable.
A non-refundable tax credit may decrease or potentially eliminate the amount of taxes you owe, but if the sum of your tax credit leaves you paying more than you owed you will not be eligible for a refund of the amount you have overpaid.
However a refundable credit it is just the opposite and if your credits leave you paying more than you owed your overpayment will be returned.
The most common tax credits for families are Earned Income Credit, Child Tax Credit, and Child and Dependent Care Credit. Here is a brief explanation of each:
A tax deduction is an amount that can be applied to your annual earnings that may place you in a lower tax bracket. A few deductions that can lower your tax table bracket and annual earnings are below.