Glad you asked. With this being the tax season, there are a lot of questions hanging out there in the air. And although I will not be preparing taxes at H & R Block this year (I did last year) I have always taken an active interest in income tax law. However, please remember to talk with your tax professional before following any of the advice you read here.

The rental credit is something you get on your California (state) taxes for being a tenant. It gets phased out as your adjusted gross income gets higher, but I do believe it was aproximately $120 last year.

Since the rental credit is not a deduction, it does not reduce your taxable income, but instead reduces your tax liability. Is it better? I would disagree. While technically a credit means more for reducing your taxes, I would rather get a deduction and accumulate wealth while doing so. Also, I remember the phase out adjusted gross income being pretty low last year before the phase-out started.

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