Tax deductions or Deductible Expenses are expenses which are used to reduce the amount of taxable income of a business or individual. Tax deductions are restricted to specific types of business expenses, including advertising, meals and entertainment, salaries and wages, and others. These deductions must be supported with business records.
In order to be deductible as a business expense, a charge must be "ordinary and necessary" for your business. An ordinary and necessary expense must be helpful and be linked to obtaining income. For example, advertising expenses can be shown to increase income; travel to meet with a potential client is necessary in order to obtain the account.
Tax deductions are often confused with tax credits, which are applied as adjustments to income in order to determine Adjusted Gross Income.
