With regards to the marketplace, what does a tax credit refer to?

curtisports2

A tax credit is applied directly to the federal/state income tax you owe. It reduces your tax dollar for dollar. Credits are always better than tax deductions. Deductions only reduce your taxable income, and only reduce your taxes by a small amount. How it works: You owe $5,000 in federal income tax. You buy something that gives you a $1,000 tax credit. Your tax is lowered to $4,000. Or You owe $5,000 in federal income tax. Your standard deduction is $12,000 (filing single). You get a $1,000 tax deduction for something. If that $1,000 is part of $12,000 (or less) in itemized deductions, it doesn't help you. If you already have at least $12,000 in itemized deductions, that $1,000 will reduce your taxable income. If you are in the 22% marginal bracket, you will save $220 in federal tax. If you're in the 12% bracket, you only save $120. Credits are always better.

Judy

subsidy