- That is exempt from payment of income tax.
tax deductible - Investment & Finance Definition
Refers to an expense that can be deducted from income on which a person pays taxes. Individuals can deduct expenses such as mortgage interest payments and charitable contributions. Medical expenses can be deducted if they exceed 7.5 percent of the taxpayer’s adjusted gross income for the year. Contributions to Individual Retirement Accounts can be deducted from taxes by people earning below a certain amount of money. Businesses can deduct virtually all of their operating expenses from the income that they earned in order to reduce their tax bill. Tax deductions reduce taxes owed only by the amount of the taxpayer’s tax bracket. For example, a taxpayer in the 28 percent bracket could receive a 28 cent benefit for each $1 of a tax deduction.