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


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.


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.


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.


An amount that may be subtracted from income that is otherwise taxable.
References in periodicals archive ?
The Congressional Joint Committee on Taxation staff's investigative report of Enron Corporation and other information revealed that taxpayers were engaging in various tax motivated transactions to duplicate a single economic loss and, subsequently, were deducting such a loss more than once.
The department had been deducting 60 percent to pay for three filling fees on which the inmate owed money; the appeals court held that the twenty-percent-of-income payments provided for under the Prison Litigation Reform Act (PLRA) must be calculated "per case" rather than "per prisoner.
In fact, following the enactment of the Small Business Job Protection Act, the Tax Court has issued a new opinion in Fort Howard, ruling that the statutory amendment does not preclude the taxpayer in Fort Howard from deducting and amortizing its financing costs and fees over the term of the loan.
But if you get to deduct three-quarters of your lease payment, you're actually deducting three-quarters of the interest as well.
Equity is the residual interest in the assets of an entity that remains after deducting its liabilities.
As an alternative to currently deducting eligible timber-related expenditures, materially participating woodland owners may capitalize them if they so choose in years during which no income is produced from the property.
Of the additional shares offered, 300,000 shares were sold by ICT GROUP for total net proceeds of $6,822,000 after deducting underwriting discounts and commissions, and the remaining 172,500 shares were sold by certain selling stockholders.
In such cases, if a taxpayer itemizes for state tax purposes and can claim the sales tax deduction, he or she may be better off deducting sales tax on the Federal return, even though the deduction results in no Federal tax savings.
For 2004 and 2005, instead of deducting state and local income taxes, taxpayers would be able to choose to deduct state and local sales taxes by either (1) accumulating receipts or (2) using IRS sales tax tables and adding actual sales taxes paid for major items, such as vehicles.
However, section 163 (h)(1) bars individuals from deducting "personal interest.
You can get more information on deducting your home office expenses by reading IRS publication No.
Thus, where an expenditure relates to the production of current income notwithstanding some incidental ensuing future benefit), the proper period for deducting an expenditure is the current period.