I hear on TV people talking about deductibles when filing taxes. What does that mean? I think on the Simpsons they said having Maggie is a deductible. Deducting what from what? I’m not American, so I don’t follow that system.
Follow-up: I think I understand it a lot more now. The government will set out criteria which will entitle you to pay less tax. It’s your job to notify the tax man at the start/end? of the tax year, so that you pay what’s deemed correct.
In: 8
A deduction is an amount of money that you can subtract from your income before paying taxes. It reduces the amount of money you owe taxes on.
If my income for the year was $50,000 and I had a $1,000 deduction, I would only have to pay income tax on $49,000.
The list of things that you can claim as a deduction is practically endless.
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