deduction investment & finance definition
An
expense that is subtracted from taxable income in order to reduce the amount of
income tax that has to be paid. Charitable donations and business expenses,
such as entertainment expenses and office supplies, are examples of items that
can be deducted.
See deduction in Wall Street Words
An expenditure that may legally be used to reduce an individual's income-tax liability. Potential deductions of particular interest to investors are expenditures for subscriptions to financial publications, a lock box for storing securities, and computer software for investment-related activities. These deductions, combined with employee business expenses and miscellaneous deductions, may be subtracted from a person's taxable income only to the extent their total exceeds 2% of that person's adjusted gross income. Interest paid on loans used to finance investments is deductible only against investment income. Also called
itemized deduction,
tax deduction. See also
charitable contribution deduction.
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