Which is an example of an income deduction?

A. An unexpected salary cut

B. Wages lost due to illness

C. Vacation budget

D. Retirement savings

Answer

The correct answer is D. Retirement savings.

Explanation

Income deductions are amounts that can be subtracted from your total income to determine your taxable income. This reduces the amount of income that is subject to tax.

A. An unexpected salary cut is not an income deduction; it's a decrease in income.

B. Wages lost due to illness are also not deductions; they represent lost income rather than a deductible expense.

C. Vacation budget refers to personal planning for travel and is not related to income tax deductions.

D. Retirement savings, often referred to as contributions to retirement accounts like 401(k) or IRAs, can be deducted from your taxable income, thereby reducing the amount subject to taxation.

Therefore, "Retirement savings" is an example of an income deduction.