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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 ?
That rule provides that if an employer includes the value of a noncash fringe benefit in the employee's income, the employer may not deduct the amount as compensation for services, but rather, may deduct only the costs incurred in providing the benefit to the employee.
Because the homes were capital assets to the taxpayer, it could not deduct the payments to the RSCs against ordinary income.
338 deemed asset acquisition could deduct (rather than capitalize) severance payments made immediately after the acquisition, under agreements in place prior to the acquisition.
The IRS then addressed whether New Target could deduct the payments as ordinary and necessary expenses, or had to capitalize them as a cost of acquiring Old Target.
47) the Tax Court ruled that an employer's $20 million 1985 contribution to a VEBA was a capital expenditure, not a current business expense; thus, the employer could not deduct the entire amount in the year contributed, even though the contribution predated the enactment of the Secs.
419 and 419A deduction limits, employers did not have an unrestricted ability to prefund welfare benefits and deduct them currently.
A lessee may deduct remaining basis in leasehold improvements when the lease is terminated; the tax consequences to the lessor are uncertain.
Before taxpayers rush to file amended Federal or state returns to deduct seller-paid points on homes purchased after 1990, they should give serious thought to whether they want to reduce their cost basis in the home, a mandatory result of deducting seller-paid points.
However, one can sympathize with the majority side of the Tax Court in that most students preparing for a career in elementary teaching cannot deduct their education expenses.
Taxpayers in managerial positions who have earned an MBA (or MBA-type) degree have been allowed to deduct their education expenses.
Assuming an education expense is ultimately determined to be deductible, the employee should deduct the expense on Schedule A as a miscellaneous itemized deduction, subject to the 2% floor.