If you get a tax deduction it means you get to reduce the amount of your income that is subject to tax. If something's on sale, you might get a percentage deduction from the original price. Deduction means taking away, or an amount taken away.
If you're a fan of Sherlock Holmes, you already know that the process of logical deduction helps to solve crimes––you take away the information you do know to deduce the answer to what you don't. In figure skating, every mistake on the ice results in a point deduction––the judges take points away.
Primary Meanings of deduction
the act of subtracting (removing a part from the whole)
reasoning from the general to the particular (or from cause to effect)
n the act of subtracting (removing a part from the whole)
n a reduction in the gross amount on which a tax is calculated; reduces taxes by the percentage fixed for the taxpayer's income bracket
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tax benefit, tax break
a tax deduction that is granted in order to encourage a particular type of commercial activity
tax write-off for expenses of doing business
a deduction allowed to a taxpayer because of his status (having certain dependents or being blind or being over 65 etc.)
deduction allowed for some (limited) kinds of entertainment for business purposes