For example, if a taxpayer invests in a stock worth $1,000 at the beginning of the year and at the end of the year the stock is only worth $800, the taxpayer has experienced a $200 loss. ![]() The tax code accommodates for this by allowing taxpayers to deduct (or exclude) income which has already been taxed or should not be counted for other reasons. Ideally, income should only be taxed once and account for any losses. Why Does the Tax Code Include Tax Deductions? Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state/local taxes paid, mortgage interest, and charitable contributions. A standard deduction is a single deduction at a fixed amount. ![]() A tax deduction is a provision that reduces taxable income.
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