An item or expense subtracted from adjusted gross income to reduce the amount...
The effect of creating a tax deduction, such as charitable contributions and mortgage interest.
Amounts that may be deducted by a taxpayer in arriving at his or her taxable income. Tax-Deferred: Income not subject to federal income tax in the current tax year but taxed in some future tax year or years. For example, earnings within an IRA are not taxed in the year or years earned, but only upon distribution to the account owner or his or her heir.
A tax-deductible expense or contribution reduces your taxable income. To calculate the worth of a tax deduction, multiply the deduction by your income tax rate. For example, if you deduct $10,000 in mortgage interest expense and are in the 25% income-tax bracket, the tax deduction is worth $2,500. If you deduct $1,000 in contributions to a charity, the tax deduction is worth $250.
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Incorporated businesses receive a tax deduction for expenses resulting from the “cost of doing business.” For individuals, tax deductions are available to compute adjusted gross income (AGI) and establish the taxable amount due. Some deductions must be in excess of a threshold or floor to qualify as a deduction.