Coordination of Tax Credits and Deductions

Coordination of Tax Credits and Deductions

The process of optimizing the use of available tax credits and deductions to minimize an individual’s or a business’s overall tax liability. It involves understanding how different credits and deductions interact, which may include considerations of eligibility, phase-outs, and limitations.

For example, if a taxpayer qualifies for both a tax credit for education expenses and a deduction for student loan interest, effective coordination would entail selecting the combination that yields the greatest tax benefit. The coordination ensures that the taxpayer takes full advantage of available tax benefits without inadvertently disqualifying themselves from more advantageous options.