A tax deduction represents an expense that is incurred by a taxpayer and is subtracted from the gross income, which lowers the overall taxable income of the taxpayer. If a person is currently paying taxes, tax-deductibility increases a person’s purchasing power so that money is “added” to the purchase that would have normally gone to taxes. For example, if a person currently paying taxes has a flat tax rate of 33%, they can buy something for $60 that is not tax-deductible, or something that is $90 and have just as much money left over. The reasoning for this is that the $60 represents the same as the $90 in earnings, but the after taxes have been paid on it. However, this is overly simplified because the U.S. tax system is not a simple flat rate of 33%. The United States tax income tax system is more complex and progressive; therefore, as taxable income increases, a higher percentage is charged on a tiered system. A tax credit is usually more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the taxes that are owed. Because tax deductions reduce taxable income, and the taxes owed are a percentage of the taxable income, the tax deductions essentially offer a fractional reduction in taxes owed. On the other hand, tax credits come directly out of the taxes owed, saving the taxpayer one dollar for each dollar of credit. For example, a charitable contribution of $1000, will result in a reduced tax bill of $250, which is 25% of the contribution if their highest portion of taxable income is taxed at 25%. In the United States, there are many different types of deductions and a person may choose between a standard or itemized deduction. Charitable contributions and donations to eligible entities, such as American Kids Cancer Fund, count as valid tax deductions.