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deduction

noun
de·​duc·​tion | \ di-ˈdək-shən How to pronounce deduction (audio) , dē-\

Definition of deduction

1a : an act of taking away deduction of legitimate business expenses
b : something that is or may be subtracted deductions from his taxable income
2a : the deriving of a conclusion by reasoning based on intuition rather than deduction specifically : inference in which the conclusion about particulars follows necessarily from general or universal premises (see premise entry 1 sense 1) — compare induction
b : a conclusion reached by logical deduction made the deduction that the suspect had been at the scene of the crime
Synonyms & Antonyms Using Deduction Beyond Math More Example Sentences Learn More about deduction

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Synonyms & Antonyms for deduction

Synonyms

abatement, discount, reduction

Antonyms

accession, addition

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Using Deduction Beyond Math

To deduct is simply to subtract. A tax deduction is a subtraction from your taxable income allowed by the government for certain expenses, which will result in your paying lower taxes. Your insurance deductible is the amount of a medical bill that the insurance company makes you subtract before it starts to pay--in other words, the amount that will come out of your own pocket. But deduction also means "reasoning", and particularly reasoning based on general principles to produce specific findings. Mathematical reasoning is almost always deduction, for instance, since it is based on general rules. But when Dr. Watson exclaims "Brilliant deduction, my dear Holmes!" he simply means "brilliant reasoning", since Sherlock Holmes's solutions are based on specific details he has noticed rather than on general principles.

Examples of deduction in a Sentence

The government is offering new tax deductions for small businesses. What is your pay after the deductions have been taken out? His guess was based on intuition rather than deduction. Our deduction was based on the information given to us at the time. It was a logical deduction.
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Recent Examples on the Web

 After starting and ending his playing career with the Cherries, Howe took over as manager in 2008, with the club languishing in the fourth division, bearing a 17-point deduction. — SI.com, "Ranking the Success of Premier League Managers Who Returned to Their Former Clubs," 8 Sep. 2019 Between 2010 and 2013, Mix donated some $155,000 and claimed deductions on his taxes for the donations. — San Diego Union-Tribune, "Ron Mix, San Diego Chargers standout turned lawyer, has been disbarred," 27 Aug. 2019 Businesses taxes can run to 50%, with minimal deductions. — Mac Margolis, chicagotribune.com, "New U.S. sanctions on Cuba have a silver lining," 20 Aug. 2019 Pizel said other steps need to be taken before adjusting rates or deductions. — Aldo Svaldi, The Denver Post, "Colorado severance tax collections expected to drop sharply, even though a bust is nowhere in sight," 18 Aug. 2019 For instance, the total combined deduction for sales, property, state, and local taxes is now limited to $10,000 (or $5,000 if married and filing separately). — Michelle Singletary, BostonGlobe.com, "Were you blindsided by your 2018 taxes? The IRS has a new tool that can help," 10 Aug. 2019 Those and other statements by legislators are encouraging, said Sen. Bill Wielechowski, D-Anchorage, who introduced Senate Bill 14 to end the per-barrel deductions. — Alex Demarban, Anchorage Daily News, "Amid public pushback over budget cuts, some GOP lawmakers open up to a conversation about oil taxes," 7 Aug. 2019 Besides rent, allowances for clergy also can be used to pay mortgage interest, utility expenses and other housing costs, and clergy homeowners still may claim property-tax and mortgage-interest deductions. — Russ Wiles, azcentral, "Secular leader in Phoenix area plans to challenge IRS on tax break for clergy, ministers," 7 Aug. 2019 The effective tax rate -- which reflects what companies pay after all deductions, credits and other breaks -- includes state income taxes. — Jason Garcia, orlandosentinel.com, "Florida is about to give more than $500 million to big corporations | Updated story," 12 Aug. 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'deduction.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of deduction

15th century, in the meaning defined at sense 1a

History and Etymology for deduction

see deduct

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More Definitions for deduction

deduction

noun

Financial Definition of deduction

What It Is

A deduction is a reduction in taxable income, which thereby lowers the amount of taxes owed. Federal, state, and local tax codes determine what kinds of items or expenses are deductible and which taxpayers are eligible for deductions.

How It Works

For example, if your gross income is $100,000 this year but you qualify for a $10,000 deduction, then you will be taxed on $100,000 - $10,000 = $90,000. If your effective tax rate is, say, 20%, then instead of paying 20% of $100,000 (i.e., $20,000) you can take the deduction and only have to pay 20% of $90,000 ($18,000). The $10,000 tax deduction saves you $2,000.

Notice that a $10,000 tax deduction does not mean you save $10,000 in taxes. This is why it is important to understand the difference between a tax deduction and a tax credit. A tax credit is a dollar-for-dollar reduction in your tax bill. So, if the $10,000 deduction had actually been a tax credit in the example above, you would have paid ($100,000 x 0.20) - $10,000 = $10,000. Compare this with the $18,000 tax bill in the deduction scenario and you can see that tax credits are usually more valuable to taxpayers.

Tax deductions often "phase out" for people with higher incomes. For example, interest paid on student loans is deductible, but if a person's modified adjusted gross income was higher than $50,000 in 2006, only a portion of the interest paid was deductible. If the person's modified adjusted gross income was higher than $65,000, the person was probably not able to deduct any of it.

There are several kinds of tax deductions in the United States. Standard deductions are deductions taxpayers usually take advantage of if they don't qualify for other deductions. When a person "itemizes" his or her deductions, they do so because they qualify for several deductions that exceed the standard deduction. Deciding whether to itemize one's deductions is a matter of knowing the tax rules and consulting a qualified tax accountant.

Why It Matters

Creating, modifying, or eliminating tax deductions are one way for governments to encourage or discourage certain types of economic growth, social behavior, or activities. For example, mortgage interest is tax deductible in part to encourage home ownership in the United States; tuition is often deductible to encourage education; charitable donations are deductible to encourage giving; and business expenses are deductible to encourage entrepreneurship and job creation.

Source: Investing Answers

itemized deduction

noun

Financial Definition of itemized deduction

What It Is

An itemized deduction is a reduction in taxable income that is dependent on calculations specific to the taxpayer's expenses or situation. Federal, state and local tax codes determine what is deductible and which taxpayers are eligible for itemized deductions.

How It Works

There are two kinds of tax deductions: standard and itemized. A standard deduction is a flat amount that applies to all qualified taxpayers. An itemized deduction requires calculations, proof of a qualifying expense, and time to fill out extra IRS forms at tax time. A taxpayer cannot claim standard deductions and itemized deductions; he must choose one.

Generally, if a taxpayer qualifies for a deduction, the taxpayer can subtract the amount of the deduction from his gross income. This in turn lowers the amount of income subject to tax. For example, if your gross income is $100,000 this year but you qualify for a $10,000 standard deduction, then you will be taxed on $100,000 - $10,000 = $90,000. If your effective tax rate is, say, 20%, then instead of paying 20% of $100,000 (i.e., $20,000) you can take the deduction and only have to pay 20% of $90,000 ($18,000). The $10,000 tax deduction saves you $2,000.

Itemized deductions often “phase out” for people with higher incomes. After all, creating, modifying, or eliminating tax deductions are one way for governments to encourage or discourage certain types of economic growth, social behavior, or activities.

Why It Matters

There are several kinds of tax deductions in the United States. Standard deductions are deductions taxpayers usually take advantage of if they don’t qualify for other deductions. Though taking a standard deduction is much easier and less time-consuming, when a person itemizes her deductions, she does so because she qualifies for several deductions that exceed the standard deduction. Deciding whether to itemize one’s deductions is a matter of knowing the tax rules and consulting a qualified accountant.

Source: Investing Answers

marital deduction

noun

Financial Definition of marital deduction

What It Is

The marital deduction refers to the deduction the IRS allows for a taxpayer to transfer some or all of his assets tax free to his spouse prior to the calculation of estate tax owed by his estate.

How It Works

The marital deduction is also known as the unlimited marital deduction.

The IRS treats a married couple as one economic entity. Estate tax is imposed only upon the demise of that economic entity. The marital deduction from the estate tax due is allowed upon the death of either husband or wife, as long as the spouse is a US citizen.

Upon the death of the surviving spouse, the entire remaining estate is taxed. Certain tax planning strategies are available to minimize this total effect.

Why It Matters

This marital deduction is important to take into estate planning considerations as the estate tax due on the entire estate of the husband and the wife is postponed until the demise of both.

Source: Investing Answers

standard deduction

noun

Financial Definition of standard deduction

What It Is

A standard deduction is a reduction in taxable income. Federal, state and local tax codes determine what is deductible and which taxpayers are eligible for deductions.

How It Works

There are two kinds of tax deductions: standard and itemized. A standard deduction is a flat amount that applies to all qualified taxpayers. An itemized deduction requires calculations, proof of a qualifying expense, and time to fill out extra IRS forms at tax time. A taxpayer cannot claim standard deductions and itemized deductions; he must choose one.

Generally, if a taxpayer qualifies for a standard deduction, the taxpayer can subtract the amount of the deduction from his gross income. This in turn lowers the amount of income subject to tax. For example, if your gross income is $100,000 this year but you qualify for a $10,000 standard deduction, then you will be taxed on $100,000 - $10,000 = $90,000. If your effective tax rate is, say, 20%, then instead of paying 20% of $100,000 (i.e., $20,000

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