# Tax Deduction

*Taxes — Finicade finance glossary*

A tax deduction reduces the income you're taxed on, so its value equals the deduction times your marginal rate — $1,000 saves $220 at a 22% rate, not $1,000. This is the difference people most often get wrong when told an expense is 'a write-off'. Deductions are worth more to higher earners for exactly this reason, which is why credits are the preferred tool when policy aims to help lower incomes.

**Formula:** `Tax saved = Deduction × Marginal tax rate`

**Also known as:** deduction, tax write-off, allowable expense

**Related terms:** [Tax Credit](https://finicade.com/glossary/tax-credit), [Marginal Tax Rate](https://finicade.com/glossary/marginal-tax-rate), [Itemized Deductions](https://finicade.com/glossary/itemized-deductions), [Taxable Income](https://finicade.com/glossary/taxable-income), [Standard Deduction](https://finicade.com/glossary/standard-deduction)

Source: https://finicade.com/glossary/tax-deduction