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Financial Terms Everyone Should Know – Tax Deduction & Credits

Understanding and properly using tax deductions and credits can reduce the amount of tax you legally have to pay. A tax deduction reduces taxable income before computing your taxes. Typical “below the line” deductions include the standard deduction, based on your filing status, deducting mortgage interest, property taxes, state and local income taxes, charitable contributions and medical expenses.  There are also “above the line” deductions that you can claim, regardless of your filing status, including student loan interest, traditional IRA contributions, health savings account contributions, and alimony payments for divorces in 2018 and earlier.

A tax credit reduces the amount of tax that is due. Common tax credits include the Child Tax Credit, Child and Dependent Care Credit, Earned Income Credit, the American Opportunity Credit, and the Lifetime Learning Credit.

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Charlie Marlow

With over 22 years of active-duty Air Force experience in military pay and travel entitlements, Charlie Marlow brings his extensive knowledge of military finance with his passion to help others reach their financial goals through common sense financial practices. Charlie holds a BS in Business Finance from Liberty University, is an Accredited Financial Counselor®, a Dave Ramsey trained Financial Coach, and co-founder, administrator, and frequent contributor to the Facebook group Military Money Matters. He still supports the Air Force and DoD as a contractor budget analyst at the Pentagon. When not writing or helping others create a personal financial plan, you can find him cycling around the National Capitol Region or enjoying classic TV shows.