(redirected from deducts)
Also found in: Dictionary, Thesaurus, Medical, Legal, Idioms, Encyclopedia.
Related to deducts: deduces


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 ?
IRS Field Attorney Advice 20061701F, (April 28, 2006), which may not be used or cited as precedent, considered whether accrual basis taxpayers can deduct employment taxes on vacation/bonus pay accrued at year-end, but not paid until the next year.
On his return, J deducts his attorneys' fees under Sec.
If a taxpayer uses a timeshare unit and it is not rented out (or held out for rent), he or she could deduct property taxes on Schedule A, under Sec.
According to revenue procedure 94-27, effective for taxable years beginning after December 31, 1990, home buyers may deduct mortgage points currently even if the points are paid by the seller of the property--as long as they reduce the property's cost basis by the amount of the seller-paid points.
Instead, it incurs and deducts the actual expenses for the flight service when actually performed and the related revenue is earned and recognized.
39 TC 333 (1962), the test for determining whether a taxpayer deducts maintenance costs properly depends on its meeting the three basic criteria:
The total cost allocable to these flights is about $340x a year, which Z fully deducts each year.
Letter Ruling 9625012(43) held that if an employee's required contribution is deducted from his after-tax salary on his paycheck, the employee's contribution is taxable; but if the employer "grosses up" the employee's salary for the required contribution and then deducts the identical amount from his after-tax salary, the deducted amount is an employer contribution excludible from gross income under Sec.
Since a partner in a trading partnership deducts these expenses as trade or business expenses when computing AGI, they are allowed in full against the AMT.
39) A lessee on the accrual method normally deducts advance rent either ratably over the lease period or as paid if the rent is based on usage of or income from the property, under Regs.
It somewhat dismissed the long-standing basic principle that an accrual-method taxpayer properly deducts a liability in the year in which the liability is incurred, regardless of when it is paid.
If a buyer deducts seller-paid points, the cost basis of the home must be reduced by the same amount.