1. • Credit vs. deduction
– Credit is worth more than a deduction
– If I send my kid to college and I get $1,000 credit, it’s worth
$1,000 in my pocket. If I get a $1,000 deduction, I save only the
tax on that amount.
• Marginal tax rates vs. Effective tax rate
– Additional dollar is taxed at the higher bracket.
– Important to know marginal rate to do tax planning.
– If I get to deduct additional $1,000 in donations and my
marginal rate is 25% I get to save $250