Exemptions and Credits

Exemptions and credits are tools that reduce your overall tax bill. An exemption typically allows you to exclude certain income or parts of your income from taxation, lowering your taxable income. Credits directly reduce the amount of tax you owe dollar-for-dollar, providing immediate savings. For example, if you qualify for a tax credit of $1,000, your tax bill decreases by that amount. Both exemptions and credits aim to make taxes fairer by recognizing specific circumstances or encouraging certain behaviors, ultimately reducing your tax liability and helping you keep more of your money.