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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 ?
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).
If these facts are established, the taxpayer may be allowed to deduct employment taxes on vacation/bonus pay accrued at year-end, but not paid until the subsequent year.
Accordingly, his legal fees ($500,000) may be deducted only under Sec.
Even so, the court permitted the taxpayer to deduct the fees as ordinary and necessary employee business expenses.
Thus, the IRS concluded that S could deduct the vacation payments in tax year X.
The contributions are deducted by the employer and paid into the fund; alternatively, an employer can agree to pay the required employee contributions.
Since the entire $100,000 was deducted in determining AMT income, the difference, $65,217 ($100,000 -- $34,783), must be added for ACE purposes.
It may not be possible to reconcile why Congress chose not to require businesses to file an insurance claim to deduct a casualty loss.
Steger deducted the entire cost of the malpractice policy on schedule C of his tax return that year.
In DeCou,(30) a real estate developer was allowed to deduct currently an abnormal retirement loss arising prior to demolition.
Until the new procedure, B could deduct $2,000, the points paid at settlement, on his return for the year the property was purchased, but not the remaining $2,000 in points paid by S.