In plain English, what is the difference between a deduction and a credit?

A deduction lowers the amount of income you get taxed on, so its value depends on your bracket. A credit lowers your actual tax bill dollar for dollar, so its value is the same regardless of your bracket. A $1,000 deduction saves someone in the 22% bracket about $220, while a $1,000 credit saves anyone $1,000. That is why credits are generally more valuable per dollar. Credits also come in two flavors: nonrefundable credits can only reduce your tax to zero, while refundable credits, like part of the Earned Income Tax Credit, can produce a refund even if you owed nothing. When comparing tax breaks, the IRS treats these very differently, so it pays to know which kind you are claiming.