Credits, which reduce your tax bill dollar for dollar, are even better than deductions.

Deductions reduce your taxable income, whereas credits reduce your actual tax bill. In this chapter, you'll learn all about the different kinds of tax credits. There are credits for low-income workers, families with children and students of all ages. For workers with a low income, there are credits to help them save for retirement, and the money can be invested in the various tax-favored funds like IRAs and 401(k) plans.