Nice round numbers: say I perform a job that gets $1000 gross (call this g) in which I incur $100 in expense (call this e). The expense is fully deductible. Assume my marginal tax rate is 25% (call this r).
When I'm figuring how much that job nets, do I use $75 (e * (1-r)) for the expense?
Is $675 (g * (1-r) - e) my net earnings (after tax)?
Similarly for household deductible expenses (e.g. energy efficiency) that will save money, etc.
For simplicity, I would subtract the expense from the gross income before accounting for taxes.
Using your example, if g is gross income, r is your tax rate, and e is your deductible expense:
net = ( g - e ) * ( 1 - r )
= ( 1000 - 100 ) * ( 1.0 - 0.25 )
= 900 * 0.75
= $675
You got the same answer because of the distributive property of multiplication, but I believe conceptually it makes more sense to deduct the expense before accounting for taxes.
Keep in mind, when talking about other deductions, such as mortgage interest, you need to look at your overall situation and whether the taxpayer is near the standard deduction amount. For some, their interest deduction and property tax are below the standard deduction, and therefore, they'd not itemize.
