Photoshop: Cut text from underlying image to expose transparent background
I'll start by saying I'm an enthusiast and amateur Photoshop User, and any help is much appreciated.
I have a simple PSD file containing 2 layers, an image and a font overlay. The underlying background is transparent. What I'm looking to do is place the font over the image, but remove it in a way that the font is "cut out" of the image with the transparent background visible.
The easiest way would be to use something called knockout, which is a non-destructive process. It is basically just a layer style, so you can turn it on and off and still edit your text etc.
If your image is the background layer, create a regular layer from it by either right clicking and selecting "Layer from Background..." or simply dragging the lock icon of the layer to the trash icon at the bottom of the panel.
Open up the Layer Style dialog for your text layer and under "Blending Options" set the fill opacity to "0" and knockout to "Deep" *.
*A "Shallow" knockout will cut through any transparency to the end of the group the layer is in. A "Deep" knockout will cut through all the way to (but not through) the background layer (which is why we hid the background).