Editing Taxation in the United States (section)

===Deductions and exemptions===
[[File:Share of Total Income and Taxes Paid by Income Group in 2011.jpg|thumb|The share of total income and federal, state and local taxes paid by income group. Total taxes include income taxes, payroll taxes, state and local sales taxes, federal and state excise taxes, and local property taxes.<ref>{{cite news|last=Coombes |first=Andrea |url=https://www.wsj.com/articles/SB10001424052702304356604577338122267919032?mod=googlenews_wsj |title=Taxes – Who Really Is Paying Up |publisher=Online.wsj.com |date=2012-04-15 |access-date=2013-10-13}}</ref>]]
{{Main|Tax deduction}}

The U.S. system allows reduction of taxable income for both business<ref>{{USC|26|161|199}}; IRS Publication 535.</ref> and some nonbusiness<ref>{{USC|26|211|224}}; IRS Publication 17, Chapters 21–28.</ref> expenditures, called deductions. Businesses selling goods reduce gross income directly by the cost of goods sold. In addition, businesses may deduct most types of expenses incurred in the business. Some of these deductions are subject to limitations. For example, only 50% of the amount incurred for any meals or entertainment may be deducted.<ref>{{USC|26|274}}; IRS [https://www.irs.gov/publications/p463/index.html Publication 463].</ref> The amount and timing of deductions for business expenses is determined under the taxpayer's [[tax accounting]] method, which may differ from methods used in accounting records.<ref>[http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=c3b3dc02944497a4e3612aa948844ae3&rgn=div8&view=text&node=26:6.0.1.1.1.0.4.13&idno=26 IRS Regulations at 26 CFR 1. 446-1]; IRS [https://www.irs.gov/publications/p538/index.html Publication 538].</ref>

Some types of business expenses are deductible over a period of years rather than when incurred. These include the cost of long lived assets such as buildings and equipment. The cost of such assets is recovered through deductions for [[depreciation]] or [[Amortization (tax law)|amortization]].

In addition to business expenses, individuals may reduce income by an allowance for [[Personal exemption (United States)|personal exemptions]]<ref>{{USC|26|151}}; IRS [https://www.irs.gov/publications/p501/index.html Publication 501].</ref> and either a fixed [[standard deduction]] or [[itemized deduction]]s.<ref>{{USC|26|63}}; IRS Publication 501.</ref> One personal exemption is allowed per taxpayer, and additional such deductions are allowed for each child or certain other individuals supported by the taxpayer. The standard deduction amount varies by taxpayer filing status. Itemized deductions by individuals include [[Home mortgage interest deduction|home mortgage interest]], [[State and local tax deduction|state and local taxes]], certain other taxes, [[Charitable contribution deductions in the United States|contributions to recognized charities]], medical expenses in excess of 7.5% of [[adjusted gross income]], and certain other amounts.

Personal exemptions, the standard deduction, and itemized deductions are limited (phased out) above certain income levels.<ref>{{USC|26|68}}; IRS Publication 17, Chapter 29.</ref>