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Categories: General Tax Terms

Allowable Deductions refer to specific expenses that taxpayers can deduct from their gross income when calculating their taxable income. These deductions reduce the amount of income that is subject to taxation, thus lowering the overall tax liability.

Allowable deductions can include a variety of expenses such as mortgage interest, charitable contributions, medical expenses, and certain business-related costs for self-employed individuals. The rules governing what qualifies as an allowable deduction can vary based on the tax laws in effect for a given tax year and the taxpayer’s specific circumstances.

For example, if a taxpayer has a gross income of $100,000 and allowable deductions totaling $20,000, they would only be taxed on $80,000 of their income.

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