A tax deduction is a deduction that lowers a person’s tax liability by lowering his taxable income. Deductions are typically expenses that the taxpayer incurs during the year that can be applied against or subtracted from his gross income in order to figure out how much tax is owed.

A reduction of the income subject to tax, for various items, especially expenses incurred to produce income.

Deductions are used by the policy makers to encourage various behaviors based on the policy goals.