• Tax deduction is a reduction of income that is able to be taxed, and is commonly a result of expenses, particularly those incurred to produce additional income.

​

• Tax exemption refers to a monetary exemption which reduces taxable income.

​

Tax credits: Directly reduces tax amount owed

​
 

• A nonrefundable tax credit means you get a refund only up to the amount you owe for taxes.

• The U.S. tax system offers the following nonrefundable family related income tax credits (in addition to a tax deduction for each dependent child):

• A refundable tax credit means you get a refund, even if it is more than what you owe.

• Individuals and families earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government.