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Tax Deduction
Term category: Taxes
In 10 words or less: An item that reduces an individual or business' taxable income.

Definition: Allowably tax deductions reduce the tax liability for an individual or business.

StockJargon Advice: Here's an example of how a tax deduction works:

Sally is a teacher who made $45,000 last year.  She incurred $250 in expenses to stock her classroom and this is an allowable deduction.  When deducted from her income, her new taxable income is $44,750.  Deducting this $250 saved her $62.50 in taxes ($250 * 25%).

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Taxes 2006 for Dummies by Eric Tyson
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