Problem:

Demonstrate the differences resulting from a $1,000 tax credit versus a $1,000 tax deduction for a single taxpayer in the 25% tax bracket with $40,000 of adjusted gross income (AGI). (Please show your work.

For tax deduction, you need to find taxable income first (assuming there is only $1,000 tax deduction and no exemptions or tax credit) before you find the tax liability. For tax credit, you need to find tax liability first (assuming no tax deductions or exemptions so taxable income=$40,000) and subtract tax credit from the tax liability you find. Please provide step by step solution and show all work.