tax deduction

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Related to Deductible expense: Out of Pocket Expense

Tax deduction

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


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 ?
By transferring the intangible assets to the holding company and charging a fee to the operating company for the use of the patent or trademark, the company creates a deductible expense for the operating company while freeing the income from taxes.
The tax authorities decided that 30 million yen the company had claimed as deductible expenses for holding explanatory meetings on its products for hospital officials was nondeductible spending, the sources said.
106 (1950), the Tax Court held that expenses attributable to abandoned reorganizations are "a deductible expense.
162-25T limits the deductible expense to actual cost.
All the factors together determine how much must be contributed to the pension plan each year to reach the ideal amount; this contribution is a deductible expense.
The IRS contended that the corporation had intentionally inflated the shareholders' salaries to create a deductible expense to circumvent the double taxation on corporate distributions.
58) As explained in a recent technical advice memorandum,(59) a deductible expense is not converted into a capital expenditure solely because the expense is incurred as part of the terms of a corporate reorganization.
23 (1999), the Tax Court, for the first time, specifically addressed whether a one-year rule exists for determining whether a payment is a capital expenditure or a deductible expense.
Answer) Yes, it would be calculated as deductible expenses.
Make sure you keep records of the entertaining - name of client, place, time and reason for the expenses - so that deductible expenses are not disallowed due to lack of information.
Deductible expenses for business use of a home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs.
The new programme offers eligible patients a maximum of USD 5,000 in co-pay assistance each calendar year for co-pay, co-insurance and deductible expenses associated with their treatment without regard for their ability to pay.