The primary tools the tax code uses to encourage taxpayers to take the actions that Congress wishes are tax deductions and tax credits. So what’s the difference? And which one is better? In this article we talk about the differences between the two and how they can work together to sometimes lower our taxes, and sometimes not.
The owners of businesses must pay various taxes on the profits that their business generates. If your business is a sole-proprietorship, partnership, LLC, or S Corporation, those profits “flow through” to your personal tax return, which is where you will pay any taxes that are owned. C corporations are taxed slightly differently, and pay corporation tax on any profits.