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Tax & Compliance
Tax Deduction
Definition
An expense that can be subtracted from taxable income, reducing tax owed.
Overview
Deductions lower your taxable income. Business deductions include office expenses, travel, software, and professional services. The tax savings depend on your tax bracket.
Example
A $1,000 business expense deduction saves $220 in taxes for someone in the 22% bracket.
Best Practices
Track all deductible expenses, keep receipts, and consult a tax professional about eligibility.
Common Mistakes to Avoid
Missing deductions
Poor documentation
Claiming personal expenses as business
Frequently Asked Questions
What's the difference between a deduction and a credit?
Deductions reduce taxable income; credits directly reduce tax owed. Credits are more valuable.