Episode 6: What Is A Deductable?

A deductible for taxes is an expense that a taxpayer or business can subtract from adjusted gross income, which reduces their taxable income, thereby reducing the amount of taxes owed. Most wage-earners use the standard deduction but those with very high deductible expenses can choose to itemize if that results in a smaller tax bill.

For individual wage-earners, some of the most commonly-used deductibles are mortgage interest payments, state and local tax payments, and charitable deductions. There also is a deduction for out-of-pocket medical costs. Self-employed people may also be able to deduct many of their work-related expenses.

Nevertheless, the vast majority of Americans have taken the standard deduction since 2018, when that figure was nearly doubled while many allowable deductions were eliminated or capped.