Deduction

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Deduction

An expense that is allowable as a reduction of gross taxable income by the IRS e.g., charity donations.

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.

deduction

An expenditure that may legally be used to reduce an individual's income-tax liability. Potential deductions of particular interest to investors are expenditures for subscriptions to financial publications, a lock box for storing securities, and computer software for investment-related activities. These deductions, combined with employee business expenses and miscellaneous deductions, may be subtracted from a person's taxable income only to the extent their total exceeds 2% of that person's adjusted gross income. Interest paid on loans used to finance investments is deductible only against investment income. Also called itemized deduction, tax deduction. See also charitable contribution deduction.

Deduction.

A deduction is an amount you can subtract from your gross income or adjusted gross income to lower your taxable income when you file your income tax return.

Certain deductions, such as money contributed to a traditional IRA or interest payments on a college loan, are available only to taxpayers who qualify for these deductions based on specific expenditures or income limits, or both.

Other deductions are more widely available. For example, you can take a standard deduction, an amount that's fixed each year. And if your expenses for certain things, such as home mortgage interest, real estate taxes, and state and local income taxes, total more than the standard deduction, it may pay for you to itemize deductions instead.

However, if your adjusted gross income is above the limit Congress sets for the year, you may lose some of or all these deductions.

Deduction

An amount that may be subtracted from income that is otherwise taxable.
References in periodicals archive ?
The Tax Court consolidated the two cases and held the payments were not alimony, meaning Hawley could not deduct them.
You can deduct the fair market value of your goods from your taxes - usually 15 percent to 20 percent of the original cost.
But if you get to deduct three-quarters of your lease payment, you're actually deducting three-quarters of the interest as well.
In 1984, Congress enacted the economic performance standard to restrict taxpayer's ability to deduct prematurely certain deductions.
The employer may deduct reimbursements at a higher rate, but only if the reimbursements reflect the actual cost of the travel and only if the employer keeps adequate records to substantiate its outlays.
In any case, the organization can then use the contribution to pay the legal fees, and deduct them as an ordinary and necessary business expense.
The Lohrke opinion does not follow the general rule that a taxpayer can deduct expenditures incurred for its benefit.
Raymond Ramirez was charged with failing to deduct some $4,000 from wages paid to Richard Hernandez during a 12-month period ending April 1, but prosecutors said Ramirez had ignored three wage assignment orders for Hernandez since May 1993.
E[acute accent]--Home Equity Loans: Regardless of what the money is used for, you can deduct all the interest on a home-equity loan of up to $100,000.
The IRS may prescribe regulations or other guidance that exempts vehicle sales in direct furtherance of the donee's charitable purposes from the requirement that the (1) donor may not deduct an amount in excess of the gross sale proceeds; and (2) donee certify the vehicle will not be transferred in exchange for money, other property or services before completion of a significant use or material improvement.
In other words the taxpayer could not deduct the expenditures until it had paid them--even though it was on the accrual method.
If you can deduct those costs, Uncle Sam will help pay for your vacation.