Tax Deduction
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An expense or allowance that reduces taxable income, lowering the amount of income subject to tax rather than directly reducing the tax owed.
## Tax Deduction
A tax deduction reduces taxable income before the tax rate is applied. The tax savings from a deduction equal the deduction amount multiplied by the taxpayer's marginal rate.
### Deduction vs. Credit
| Feature | Deduction | Credit |
|---------|-----------|--------|
| Reduces | Taxable income | Tax liability |
| Value | Depends on marginal rate | Dollar-for-dollar |
| Example | $10,000 deduction saves $2,200 (at 22%) | $2,200 credit saves $2,200 |
### Common Deductions (US)
- Standard deduction ($15,200 single, $30,400 married filing jointly for 2025).
- State and local taxes (SALT, capped at $10,000).
- Mortgage interest.
- Charitable contributions.
- Student loan interest (up to $2,500).
- Self-employment expenses.
### Global Variations
Most countries offer some combination of standard deductions (personal allowance in the UK, Grundfreibetrag in Germany) and itemized deductions, though the specific items vary.