What’s the difference between a tax credit and a tax deduction?

A tax credit reduces the actual amount of tax you owe. A tax deduction reduces your taxable income before your tax is calculated. Tax Credits give a euro-for-euro reduction in your tax bill. Deductions reduce the income that gets taxed.

• Tax credit example: If you owe €5,000 in tax and have a €2,000 credit, you pay €3,000. Tax credits include the basic personal tax credit and employee tax credit.
• Tax deduction example: If you earn €50,000 and get a €5,000 deduction, your taxable profit is calculated on €45,000.