What is the difference between a tax deduction and a tax exemption?

@joelle 

A tax deduction is a reduction in taxable income, meaning it reduces the amount of income that is subject to taxation. It allows taxpayers to subtract certain expenses, such as business expenses, mortgage interest, or charitable donations, from their total income before calculating their tax liability. The deduction ultimately reduces the amount of tax owed.

On the other hand, a tax exemption is a complete exclusion of certain income or assets from being subject to taxation. It means that the taxpayer does not have to pay taxes on the specified income or assets. Essentially, the exempted income or assets are not included in the calculation of taxable income.

In summary, a tax deduction reduces the taxable income, thus reducing the amount of tax owed, while a tax exemption completely eliminates the taxation of specific income or assets.