Taxes, and the coming changes to the code, have been getting a lot of attention this year, especially since the tax reform bill was just approved by Republicans in both the House and the Senate last week. Changes to the tax structure for small businesses, and the implications for entrepreneurs, has been a prominent part of the debate as the bill has moved through Congress. These are issues and changes that could have a real impact on your bottom line.

This time of the year is already busy enough for entrepreneurs running their own business, running a side hustle, or starting a new seasonal business, and  tax planning is one of the things that can easily be overlooked. Even if you do incorporate some information related to tax reform in to your tax planning process, however, it can be tough to cover all bases.

Specifically, even with all of the articles and publications on how taxes will change for small business, how individual tax rates may change, and how small business may change, there is one item that you may have overlooked.

Let's take a look at the difference between two common phrases tossed around during tax season, tax credits and tax deductions:

1. What are tax credits.

An easy to understand definition of a tax credit is an amount of money that a taxpayer, whether it is a business or individual, is able to subtract from the taxes owed to the government. Depending on the business you are operating, you may qualify for specific deductions, which are granted in order to encourage certain types of behavior, such as replacing certain business assets with more energy efficient ones.

In general, tax credits are more favorable than deductions or exemptions, since a tax credit reduces your tax liability dollar for dollar. Tax deductions and exemptions still reduce your tax liability, but only do so at your marginal tax rate. For example, if your business operates in the 25 percent tax bracket, for every $1 of deduction you take you would save $0.25 for every marginal tax deduction.

Examples of tax credits you might be eligible for include, but are not limited to, the alternative motor vehicle credit, employer-provided child care credit, and the work opportunity tax credit.

2. What are tax deductions.

A tax deduction is a reduction in your tax obligation, and is subtracted from your adjusted gross income, which is the income you and your business are actually taxed on. These deductions are removed from your taxable income, which reduces your overall tax liability. While not as beneficial, on a dollar for dollar basis, as tax credits, tax deductions will reduce your tax liability for you and your business.

One important thing to keep in mind as you work with your CPA or tax professional is that tax deductions can vary on a regional, state, and federal levels. Deductions are, like tax credits, offered to help incentivize certain types of behavior or actions on the part of you and your business.

Common examples of business tax deductions your business might be eligible for include business vehicle expenses, rent and taxes paid on your business property, business travel, and your home office deduction.

There has been a lot of debate, conversation, and analysis around the proposed changes that are coming to the tax code for individuals and businesses, and it is easy to get lost in the numerous changes that keep occurring. Taking a step back, working with your CPA or tax professional, and understanding some of the basics of tax planning, namely tax deductions and tax credits, can save you time, and money, this coming tax season.