A tax deduction is a reduction of the income subject to tax, for various items.

If you are engaged in a trade or business, then business expenses incurred as ordinary and necessary costs in running your trade or business are generally deductible.

If you are an individual. most of your personal expenses are not deductible from your income. However, the tax law provides for certain types of deductible personal expenses, such as state local taxes, home mortgage interest and medical and dental expenses. These deductions are generally subject to some conditions or limitations.

Outlays that produce future benefit are generally required to be capitalized, sometimes with exceptions. Many capitalized expenses may be deducted in some manner over a period of time, such as through allowances for depreciation or amortization.

Taxable income is also reduced for personal allowances .