A deduction from gross income that arises due to various types of expenses incurred by a taxpayer. Tax deductions are removed from taxable income (adjusted gross income) and thus lower the overall tax-expense liability.

Watch: Tax Deduction Vs. Tax Credit

Different regions have different tax codes that allow a variety of expenses to be deducted from taxable income. Tax deductions are often used to entice taxpayers to participate in programs which have a societal benefit. For example, charitable donations and the expenses incurred to make one's home more environmentally friendly can sometimes be deducted from taxable income.