What's the difference between a tax credit and tax deductible?

A credit is a dollar-for-dollar reduction in your tax liability.

A deduction reduces the amount of income that is subject to tax. The tax benefit is the amount of the deduction multiplied by your marginal tax rate.

For example, if your tax liability is $2,000 and you qualify for a $1,000 tax credit, your tax liability is reduced to $1,000. If you qualify for a $1,000 tax deduction and are in the 25% marginal bracket, your tax savings would be $250.