What are the differences between deductions, exemptions and credits?

What are the differences between deductions, exemptions and credits?

Steve Duben, CPA (Partner, Duben & Natividad) gives expert video advice on: What is a "deduction"?; What is a "standard deduction" and how much is it?; What is an "itemized deduction"? and more...

The exemption is the children, yourself, your spouse that you are able to claim. It's printed on the front page of the tax return, and you get the benefit of that exemption on the second page of your tax return in computing your taxable income. A credit is a dollar-for-dollar reduction of your tax liability, whereas a deduction, unlike a credit, reduces your taxable income, which is subject to the tax rate. Depending on where you are on that tax rate schedule is to how much benefit you get from a deduction.