Suppose a student is in the 10% tax bracket. Once he begins college, he can choose a $3200 deduction or a $1000 credit to offset tuition and fees. Which option will reduce his tax bill by the greater amount? What is the difference in his savings between the two options?
To establish the scheme that will reduce the tax Bill, we will proceed as follows; amount deductible in option one will be: 10/100×3200 =$320 amount deductible in option two will be: 10/100×1000 =$100 Option 2 will reduce his tax. The amount of taxed will be reduced by (320-100)=$220
