Deductions, credits, and rebates whats the difference?
Tax deductions reduce your overall taxable income; the value of the deduction depends on your tax bracket. For example, if you are eligible for a $1,000 deduction and are in the 20% tax bracket, the deduction will reduce your taxes by $200. Tax credits, such as the ones provided for in the 2005 Energy Policy Act, reduce the amount of tax you owe dollar for dollar. Rebates are simplified incentives instead of reducing the amount of tax you owe; rebates reduce the cost of a purchase. Think of the rebate you may get on a cell phone or small appliance. Rebates on energy-efficiency investments are offered by some utilities and states (see http://www.energytaxincentives.org/tiap-state-utility-incentives.html).
