Deductions reduce how much you owe in taxes by actually decreasing your income. For example, you might have a $1,500.00 medical deduction from your personal gross income.. If high enough, these tax reductions can even place you in a lower tax bracket, thus reducing your taxes even more. 

Credits are a dollar-for-dollar reduction in the amount of income tax you actually pay. It is deducted after you compute your taxable income. A 30% tax credit on a $5,000 solar hot water installation will actually reduce the taxes you pay by $1,500.00.

If you're in the 25% bracket, a $1,500.00 deduction lowers your tax bill by $375.00 or $300.00 if you are in the 20% tax bracket. 

But a $1,500.00 tax credit lowers your tax bill by the full $1,500, no matter what your tax bracket. 

Think of a tax credit as your gift card from Uncle Sam which reduces the total income tax paid by the entire amount of the credit rather than just a percentage..