Tax deduction: definition, example, and why it matters

Trades commonly deduct mileage (cents/mile or actual cost), tools, materials, insurance, office expenses, and software. Keep receipts and a contemporaneous mileage log to survive an audit.

• Short definition. A business expense that reduces taxable income.
• Category. Tax deduction is a tax term used by service businesses when billing customers.
• How Glo Invoice handles it. Glo Invoice builds tax deduction into the invoice itself, so you don't track it on paper or in a spreadsheet.

Frequently asked questions

What does tax deduction mean?

Trades commonly deduct mileage (cents/mile or actual cost), tools, materials, insurance, office expenses, and software. Keep receipts and a contemporaneous mileage log to survive an audit.

Related terms

• Mileage deduction — Deducting the cost of business driving from taxable income.