{"id":173,"date":"2017-10-14T05:08:12","date_gmt":"2017-10-14T05:08:12","guid":{"rendered":"http:\/\/www.irstaxapp.com\/?p=173"},"modified":"2017-10-16T16:46:04","modified_gmt":"2017-10-16T16:46:04","slug":"tax-exemptions-tax-deductions-tax-credit-different","status":"publish","type":"post","link":"https:\/\/www.irstaxapp.com\/tax-exemptions-tax-deductions-tax-credit-different\/","title":{"rendered":"How Personal Tax Exemption , Tax Deductions & Tax Credit Are Different From Each Other ?"},"content":{"rendered":"

\"personal <\/picture><\/a>The moment you start computing taxable income of a person, you will come across the term tax deductions , personal tax exemption and tax credit . Two things about these taxation terms are well established – all three terms are completely different in meaning and application and all of them , ultimately , reduce bring tax relief for Individuals. <\/p>\n

In simple terms , the deductions and tax exemptions reduces your taxable income<\/strong> ( so ultimately reduces tax payable , but tax credit is applied to reduce the tax payable directly<\/em>. In other words, tax credits are reduced after you computed taxable income and tax thereon .<\/p>\n

Personal Tax Exemption<\/h2>\n

For tax year 2017, you are entitled to\u00a0 maximum personal and dependent exemption amount which is fixed at $ 4050\u00a0 . Please read what is\u00a0tax exemption\u00a0<\/a>?\u00a0 Or just go tutorial by IRS<\/a><\/p>\n

What are Tax Deductions ?<\/h2>\n

Deductions are amounts in form of expense which are allowed to be reduced from income itself<\/em> . Say,\u00a0you donated certain amounts to charity or paid interest on educational loan or took home loan and paid interest ……like wise. The tax deductions are always related to some kind of outflow of cash within the tax year and if along with that\u00a0expenditure , other conditions of a particular deductions are also satisfied , in that case US tax law permit you to deduct the said expenditure from that gross income . Basically you can group these deductions as standard deduction , Above the Line Deduction and itemized deduction ( Below the Line Deduction) .<\/p>\n

Standard deduction is announced every year. Read the standard deduction <\/a>for tax year 2015.<\/p>\n

The list of \u00a0deductions under Internal Revenue Code are as under<\/p>\n