Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

Tax deductions provide reductions in what amount for a taxpayer?

1. Total Income

2. Taxable Income

3. Capital Gains

4. Appraisal Value

The correct answer is: Taxable Income

Tax deductions specifically reduce taxable income, which is the amount of income that is subject to tax by the government. When a taxpayer claims a deduction, it lowers the income that is considered for taxation, potentially resulting in a lower overall tax liability. This means that the amount of tax owed is calculated based on the reduced income, providing financial relief to the taxpayer. The other options illustrated do not accurately represent the function of tax deductions. Total income refers to all income before any deductions are applied, while capital gains pertain to profits from the sale of assets and are subject to different types of deductions and allowances. Appraisal value is related to the assessed value of property for various purposes, such as taxation or financing, but it does not directly impact the taxable income of an individual. Thus, the correct choice highlights how tax deductions specifically affect the calculation of taxable income.