Deduction in general refers to a subtraction or to the drawing of a
conclusion through a reasoning process. In tax law, a deduction is an expense
that may be subtracted from gross income to reduce an individual's income-tax
liability. Some types of deductions allowed by the Internal Revenue Service
include:
- Business deduction-a deduction usually taken from gross income that
is allowed for losses or expenses attributable to business activities or
to activities engaged in for profit.
- Charitable deduction- a deduction allowed for a contribution to a
charity usually that is qualified under the tax law.
- Dependency deduction- a deduction allowed to be taken in a set amount
for a qualified dependent.
- Itemized deduction- a deduction for a specifically recorded item
that is allowed to be taken from adjusted gross income if the total of
such deductions exceeds the standard deduction.
- Marital deduction- a deduction allowed under the Internal Revenue
Code to be taken from the gross estate that amounts to the value of any
property interest which is included in the estate and which was given by
a decedent to the surviving spouse ,provided that the interest is not terminable
during the life of the survivor; a deduction allowed under the IRC of the
value of any gift inter vivos subject to gift tax by one spouse to the
other.
- Personal deduction- a deduction allowed to be taken for losses or
expenses that are not necessarily attributable to a business activity or
an activity engaged in for profit.
- Personal exemption deduction- a deduction for an amount set by tax
law that includes the dependency deduction.
- Standard deduction- a deduction of an amount set by tax law that
is allowed to be taken from adjusted gross income unless the taxpayer elects
to itemize deductions.
