Deduction

A deduction is an amount subtracted from an employee’s gross pay, either as a required or voluntary reduction. Deductions can be for taxes (such as federal, state, and local income taxes), benefits (like health insurance or retirement contributions), or other items (such as union dues or wage garnishments). These deductions are withheld by the employer and remitted to the appropriate agency or organization. Deductions reduce an employee’s take-home pay, and it is important for both employees and employers to track them accurately to ensure proper payroll processing and compliance with tax regulations.