Rebates, Deductions, and Credits – Whats the difference?
Tax deductions reduce your overall taxable income with the value of the deduction dependent 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 many of the incentives discussed on this web site, reduce the amount of tax you owe dollar for dollar. Rebates are simplified tax credits- instead of reducing the amount of tax you owe; rebates reduce the cost of a purchase, such as a new cell phone. Rebates on energy efficiency investments are offered by some utilities and states.
