It’s not your average tax credit
As we’ve already mentioned, many Americans believe that Uncle Sam will add their stimulus payments to their income, therefore, they are expecting to see a bigger tax bill or a reduction in their tax refund when filing their it. However, that’s definitely not the case for stimulus payments.
We all know that tax deductions are a great thing as they minimize your income, which eventually will decrease the amount of tax money you owe to the IRS. For example, if you had $50,000 in terms of income and a tax deduction of $5,000, your taxable income would be reduced by $5,000.
Also, if you find yourself in the 12% tax bracket, the taxes you owe will be minimized by $600. This amount of money represents 12% of $5,000.
So, yes, tax deductions are great, but when compared to tax credits, your financial balloon gets burst pretty quickly.