Tax deduction definition
/What is a Tax Deduction?
A tax deduction is a reduction of the adjusted gross income of a taxpayer, which reduces the person’s income tax liability. Tax deductions are set by federal, state and local tax codes and are intended to incentivize taxpayers to act in certain ways. At the federal level, a taxpayer may take a standard deduction, which is sufficient for most people, or itemize deductions.
Tax Deduction Example
The charitable contribution tax deduction encourages taxpayers to give money to qualifying charities. Another deduction is for any losses realized from investments.