tax deduction

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Tax deduction

An expense that a taxpayer is allowed to deduct from taxable income.

Deduction

An amount of money that one may subtract from one's gross annual income when calculating one's income tax liability. A common misconception about tax deductions is that they represent a dollar-for-dollar reduction of one's tax liability. Rather, a deduction removes a certain dollar amount from the income the IRS uses to calculate the percentage of one's income that is owed in taxes. Common deductions are charitable contributions, business expenses, and interest on mortgages. See also: Tax credit.

tax deduction

See deduction.

tax deduction

An expense allowed as a reduction of taxable income.The most common individual deductions are for home mortgage interest,ad valorem and sales taxes,moving expenses associated with a job, charitable giving, and health-care costs. Virtually all expenses associated with income-producing property are deductible, including noncash expenses such as depreciation. Virtually all operating expenses for a business are deductible, except that capital expenditures (a new roof, expansion of building, purchase of equipment) must be capitalized and depreciated over time unless falling within the Section 179 limits. Section 179 lets a taxpayer deduct as expenses certain things that would otherwise have to be capitalized.

References in periodicals archive ?
26 /PRNewswire-USNewswire/ -- There is good news for students and families filing taxes this year: the extension of the tuition and fees deduction and the tax permanency of 529 savings plans means greater opportunities to save at tax time.
The tuition and fees deduction is available this year to students and families who cannot claim the Hope Scholarship Credit or the Lifetime Learning Credit.
Two new above-the-line deductions that can provide tax savings are the tuition and fees deduction for higher education and the educator expenses deduction for teachers.
The tuition and fees deduction, new for the 2002 tax year, can reduce the taxable income of taxpayers based on college tuition and fees paid during the tax year.
The tuition and fees deduction allows a taxpayer to deduct as much as $3,000 from his or her taxable income for tuition and fees paid for the taxpayer, his or her spouse, or his or her dependents.