Tax deductions reduce the amount of income that is subject to tax
You subtract eligible deductions from your gross income to get taxable income
Lower taxable income usually means a lower tax bill
Some deductions are available to all taxpayers
Some deductions are only available if you itemize instead of taking the standard deduction
Common deductions can include mortgage interest, charitable donations, and certain medical expenses
Business expenses may be deductible if they are ordinary and necessary for the business
Retirement contributions may be deductible depending on the account type and income level
Student loan interest may be deductible within certain limits
Self-employed people may deduct eligible business costs and part of self-employment tax
Tax laws set rules, limits, and eligibility requirements for each deduction
You usually need records or receipts to support deductions
Deductions are claimed on your tax return using the appropriate forms
Credits reduce tax owed directly, while deductions reduce taxable income
The value of a deduction depends on your tax rate
A deduction worth more to someone in a higher tax bracket can lower more tax