Deductions - Definition

Tax deductions are expenses the IRS allows you to subtract from your taxable income. If you have taxable income of $30,000 and deductions of $3,000, then you would figure how much tax you owe on the difference -- $27,000. Most deductions are reported by itemizing taxpayers on Schedule A, but some -- such as alimony payments, moving expenses, deductible IRA and Keogh contributions -- are found directly on the long Form 1040.