What is a tax deduction?

A tax deduction is an allowable expense that a taxpayer can subtract from their taxable income when filing their tax return. This reduces the amount of income subject to taxes, ultimately lowering the tax liability owed.  

There are two main ways to claim tax deductions:

• Taxpayers can itemize their deductions by listing all eligible expenses on a separate schedule attached to their tax return
• Taxpayers can opt for the standard deduction – a fixed dollar amount set by the government and automatically applied to their taxable income

Here are some examples of tax deductions (may vary depending on your location):

• Business expenses, e.g. office supplies, rent, travel
• Medical expenses exceeding a certain threshold 
• Mortgage interest paid on a home mortgage loan 
• Charitable donations
• State and local taxes

Frequently asked questions

How do I learn which tax deductions I can claim?

Tax laws and allowable deductions may vary depending on your location (country, state, etc.) and tax filing status.
The best resources to determine which deductions you qualify for are:

• Official government tax authority websites 
• Tax professionals, who can inform you about the deductions you’re entitled to 

Can I deduct personal expenses?

Generally, only some personal expenses qualify for tax deductions, such as necessary business expenses or medical costs.
Personal expenses unrelated to business or exceeding designated limits are typically not deductible.

What happens if I claim deductions for which I’m not eligible?

Claiming deductions you don’t qualify for can result in penalties or additional taxes owed if discovered by the tax authorities during an audit.