Tax deduction

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A tax deduction is a way to reduce the amount of income that is subject to a tax. Tax deductions and tax credits both lower the amount of money a person has to pay in taxes.[1] But they do it differently. A tax deduction is subtracted from a the gross income of a taxpayer.[2] For example, if a couple had an income of $60,000 for the year, and they had paid $10,000 in interest on their mortgage, their taxable income would be reduced to $50,000. The value of a tax deduction depends on a person's tax rate, which rises with income. A tax credit, by comparison, has the same value for all taxpayers.[3] In the US there are hundreds of different tax deductions. Some are only available to taxpayers in certain income brackets. Some are available to businesses in particular industries.[2]

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