DEFINITION of 'Deduction'

Any item or expenditure subtracted from gross income to reduce the amount of income subject to tax.

Also referred to as "allowable deduction".


For example, if you make $40,000 and you have a deduction for $1,000, then your taxable income is reduced to $39,000.

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  1. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  2. What is the difference between federal and state withholding tax?

    You can file your federal taxes by yourself by downloading and printing the forms off the Internal Revenue Service, or IRS, ... Read Full Answer >>
  3. Are gross sales and taxable gross sales the same thing?

    The terms gross sales and taxable gross sales are not the same thing, and the difference can mean a huge difference in the ... Read Full Answer >>
  4. How do value-added taxes work in the European Union?

    A value-added tax (VAT) in the European Union functions in much the same way as a VAT in any other legal jurisdiction. VAT ... Read Full Answer >>
  5. What tangible assets are depreciated?

    Nearly all tangible assets can be depreciated. An asset is considered "tangible" when it has a physical form. This includes ... Read Full Answer >>
  6. What's the average salary of a tax manager?

    According to a December 2014 study published on, the median salary for a tax manager was $110,440. ... Read Full Answer >>
  7. How can I make sure I get all my eligible deductions?

    Most tax preparation software does a good job. However, like any recipe, the end results are only as good as what goes into ... Read Full Answer >>
  8. Which is better for tax deductions, itemization or a standard deduction?

    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ... Read Full Answer >>
  9. If I pay for a course to learn about trading can I write some of it off?

    There are some investing costs that can be written off each year, even if you aren't a day trader. The general rule in determining ... Read Full Answer >>
  10. What are some commonly missed deductions for business owners?

    If you own a business, you are eligible to deduct certain business-related expenses. These include deductions for the following: Home ... Read Full Answer >>
  11. How can I reduce the taxes on my inherited retirement assets?

    Many beneficiaries miss out on one of the most significant tax deductions for inherited retirement-plan assets; the income ... Read Full Answer >>

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