Tax deduction is a simplified phrase for meaning income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and tax credits. The difference between deductions, exemptions, and credits is that deductions and exemptions both reduce taxable income, while credits reduce tax. Above and below the line Above and below the line refers to items above or below adjusted gross income, which is item 37 on the tax year 2017 1040 tax form. Tax deductions above the line lessen adjusted gross income, while deductions below the line can only lessen taxable income if the aggregate of those deductions exceeds the standard deduction, which in tax year 2018 in the U.S., for example, was $12,000 for a single taxpayer and $24,000 for married couple. Limitations Often, deductions are subject to conditions, such as being allowed only for expenses incurred that produce current benefits. Capitalization of items producing future benefit can be required, though with...