Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, first of all, taxable income . . . you're not taxed on all the income you earn, you're only taxed on so-called taxable income. You get taxable income by using deductions that you're allowed to take. And deductions are simply expenditures that the federal government smiles on and says you can reduce your gross income to taxable income by taking those deductions. Also, you can take exemptions, which is a monetary amount based on how many people you have in your household. Secondly, credit. A credit is actually a very valuable tax term because it actually reduces the amount of your taxes paid dollar for dollar with the credit. So a credit is much more important than a tax deduction. Tax rate, there are really two key ones here. The average tax rate is simply your taxes paid divided by your taxable income, so it's on average, how much taxes do you pay. But your marginal tax rate is the tax rate that you pay on additional money that you earn, additional taxable income. And the two can be different. In fact, they usually are different, especially for the federal income tax. And then finally, we talked about a tax credit reducing your taxes dollar for dollar, what is the value of a tax deduction? You would find that by taking the monetary amount of the deduction and multiplying it by your marginal tax rate. Usually that marginal tax rate is about 25 to 30 percent. So every deduction you have saves taxes at a rate of about 25 to 30 cents per dollar."