subtraction from adjusted gross income for individual taxpayers. Examples of allowable deductions are mortgage interest, certain casualty losses, medical expenses, contributions, and miscellaneous. The actual amount of deduction allowed is the excess of the total itemized deductions less the standard deduction (previously called zero-bracket amount). Only this residual amount is deducted from adjusted gross income to compute taxable income.
item that allows a taxpayer to reduce adjusted gross income on his or her tax return. For example, mortgage interest, charitable contributions, state and local income and property taxes, unreimbursed business expenses, IRA contributions, and other miscellaneous items are considered deductible under certain conditions, and are listed as itemized deductions on Schedule A of an individual's tax return. However, at certain income levels, deductions are phased out. For example, in the 2005 tax year, itemized deductions for married couples filing jointly were phased out by 3% of the excess of adjusted gross income over $145,950 (if married and filing separately, then $72,975) adjusted annually for inflation. Some deductions are not subject to the 3% reduction, including medical and dental expenses, investment interest, casualty and theft losses, and gambling losses.
