Deduction Limit

The deduction limit refers to the maximum amount of expenses or losses that a taxpayer can subtract from their income when calculating their taxable income. This limit is set by tax laws and varies depending on the type of expense or the taxpayer's circumstances. Essentially, it defines the threshold for how much of their costs can reduce their taxable income, which ultimately affects how much tax they owe. Understanding deduction limits is important for effective tax planning and ensuring compliance with tax regulations.