What is a tax deduction?
The Bankrate.com financial term of the day is: "tax deduction."
The Internal Revenue Service allows you to lower your potential tax hit by subtracting some amounts from your income before it puts the bite on your money. A tax deduction is one kind of pretax subtraction. A taxpayer may take either a standard deduction amount, established each year by the IRS, or may itemize deductions, listing various eligible expenses such as mortgage interest and state income taxes.
A tax deduction lets you clip the amount of your income that's subject to taxes.
For help making sense of your taxes, visit the Taxes section at Bankrate.com.