Tax deduction

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(Redirected from Deductibility)

Tax deduction is a reduction in tax obligation from a taxpayer's gross income. Tax deductions can be the result of a variety of events that the taxpayer experiences over the course of the year. Tax deductions are removed from taxable income (adjusted gross income) and thus lower the overall tax-expense liability.

Types of Tax Deductions[edit | edit source]

There are several types of tax deductions, including:

  • Standard Deduction: This is a portion of income that is not subject to tax and can be used to reduce a tax bill in lieu of itemizing deductions.
  • Itemized Deductions: These are expenses that can be subtracted from adjusted gross income to reduce the amount of income subject to tax.
  • Above-the-Line Deductions: These are deductions that are taken before the taxpayer's adjusted gross income is calculated, reducing the amount of income that is subject to tax.

Benefits of Tax Deductions[edit | edit source]

Tax deductions can provide several benefits to taxpayers. They can reduce a taxpayer's overall tax liability, potentially resulting in a refund. They can also provide incentives for certain behaviors, such as purchasing a home, investing in retirement, or donating to charity.

Limitations and Rules[edit | edit source]

There are limitations and rules associated with tax deductions. For example, some deductions are only available to taxpayers who itemize their deductions. In addition, there are limits on the amount that can be deducted for certain expenses, such as state and local taxes.

See Also[edit | edit source]

References[edit | edit source]

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