Homonym: Deduct (Subtract)
To "deduct" means to subtract or take away a certain amount from a total. This term is commonly used in mathematics and finance, where you might deduct expenses from your income to determine your net profit. For example, if you earn $1,000 and have $200 in expenses, you would deduct the expenses to find that your net income is $800.
In taxation, individuals and businesses can deduct specific expenses from their taxable income, which can lower the amount of tax they owe. Common deductions include mortgage interest, charitable contributions, and medical expenses. Understanding how to deduct properly can help in effective financial planning and tax management.