Tax deduction
A tax deduction is a way to reduce the amount of income that is subject to a tax. Tax deductions and tax credits both lower the amount of money a person has to pay in taxes.[1] But they do it differently. A tax deduction is subtracted from the gross income of a taxpayer.[2] For example, if a couple had an income of $60,000 for the year, and they had paid $10,000 in interest on their mortgage, their taxable income would be reduced to $50,000. The value of a tax deduction depends on a person's tax rate, which rises with income. A tax credit, by comparison, has the same value for all taxpayers.[3] In the USA, there are hundreds of different tax deductions. Some are only available to taxpayers in certain income brackets. Some are available to businesses in particular industries.[2]
References
[change | change source]- ↑ Elizabeth Rosen (28 August 2013). "Tax credits vs. tax deductions". US Tax Center. Archived from the original on 10 December 2015. Retrieved 10 December 2015.
- ↑ 2.0 2.1 "Tax Deduction". InvestingAnswers, Inc. Archived from the original on 3 November 2015. Retrieved 10 December 2015.
- ↑ "Income Tax Issues: What is the difference between tax deductions and tax credits?". Urban Institute, Brookings Institution. Archived from the original on 10 December 2015. Retrieved 10 December 2015.
