India, Feb. 12 -- The IRS has issued a stern warning on tax credits. Credits, notably, work differently from deductions. Credits reduce the tax due on a dollar-for-dollar basis, and does not reduce your taxable income.

For example, consider an individual who got a $2,000 tax credit. If they owed $5,000 in taxes, their $2,000 credit means they will only owe $3,000.

However, if they got a $2,000 deduction, it would just bring their taxable income down. Hence, if they made $50,000, they would only be taxed on $48,000.

Their $2,000 credit saves them $2,000. However, if they were in the 22% tax bracket, their $2,000 deduction saves them $440.

Anyone who is eligible for credits must always claim them. However, those claiming two of the most...