Tax Deduction (Noun)
Meaning
A reduction in the gross amount on which a tax is calculated; reduces taxes by the percentage fixed for the taxpayer's income bracket.
Classification
Nouns denoting possession and transfer of possession.
Examples
- Home mortgage interest can be a valuable tax deduction for many homeowners, especially in the early years of a loan when the majority of monthly payments go toward interest rather than principal.
- Business owners may claim charitable donations as a tax deduction to help reduce their taxable income and ultimately lower their tax bill.
- She made a tax deduction of twenty thousand dollars from her gross income as medical expenses and reduced her taxable income to seventy thousand dollars.
- When purchasing a car for business purposes, many costs, such as gas and insurance, may qualify as a tax deduction on a company's annual return.
- People may use 401k or retirement contributions as a tax deduction on their tax returns.