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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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 ?

However, there is an inherent tax benefit since fees deducted from an IRA are not subject to income tax.

Maximizing Clients' Income Tax Savings: Deducting Your Fee

4) The taxpayer must not deduct any payroll taxes with respect to any employee whose pay could exceed the wage caps at the time the accrued wages are paid (i.e., within the 2.5 months after the year-end).

Accrued taxes: new IRS advice may accelerate payroll tax deductions

[Sections] 1.162-4, the cost of incidental repairs that neither materially add to the value of property nor appreciably prolong its life, but rather keep it in an ordinarily efficient operating condition, may be deducted as an expense.

The need for additional guidance on capitalization issues

Since Congress believes that a single economic loss should only be deducted once, the 2004 American Jobs Creation Act added Sec.

Two new elections: charitable contributions and tax-free incorporations

The pre-1994 interest of $787,994 had not been deducted by the taxpayer due to the restrictions of IRC section 267(a)(2).

Note sale: does it accelerate related-party interest deductions?

73-146, taxpayers presumably should be allowed to follow the IRS's guidance and deduct costs related to payments to employees to terminate unexercised stock options and warrants.

INDOPCO and the tax treatment of reorganization costs

Rather, I would have to wait to deduct the loss until the amount of potential recovery is ascertained.

Tax consequences to investors of broker fraud and theft: there are a number of ways tax advisers can help clients who are victims of investment fraud or theft. This article discusses the tax issues faced when trying to recoup some of the loss

This leaves open the slight chance that if a future taxpayer can prove its postacquisition activities determined the amount paid to settle the assumed debt, it could deduct this amount.

Appeals court confirms treatment of assumed liabilities

A beneficiary of a qualified subchapter S trust may deduct suspended losses under the at-risk rules and the passive loss rules when the trust disposes of the S corp stock.

A new corporate tax relief bill: highlights from the American Jobs Creation Act of 2004

You can deduct the business percentage of payments you make for utilities and general home services.

Getting your financial house in order

Briarcliff is merely one example of the well-settled principle of federal income tax law that ordinary expenses of an ongoing business are properly treated as expenses of the current period.(30) Thus, an already established and going concern may deduct ordinary and necessary expenses incurred in the expansion of its existing normal business activity.(31) Expenses that are deductible as costs incurred in the expansion of a business include expenditures by an existing company for the purposes of developing a new sales territory,(32) increasing sales through promotional activities,(33) and developing foreign markets.(34)

Notice 96-7: request for comments on further capitalization guidance

In FedEx Corp., 2/16/05, the Sixth Circuit affirmed a district court's decision (291 FSupp2d 699 (WD TN 2003)), that the taxpayer could currently deduct off-wing maintenance costs related to engine shop visits (ESVs) for aircraft engines and auxiliary power units (APUs).