Which of the following describes a common misconception about tax deductions?

Tax deductions lower your taxable income by allowing you to subtract specific expenses from your total income, which can ultimately reduce the amount of tax you owe. This process involves determining your gross income, then applying the deductions to arrive at your taxable income. For example, if you earned $50,000 and had $10,000 in deductions, your taxable income would be $40,000. This reduction in taxable income typically results in a lower tax liability, making it a critical aspect of tax planning.

The other options reflect misunderstandings about tax deductions. Refundable tax deductions do not exist, as deductions typically reduce taxable income but do not result in a reimbursement. While some deductions apply irrespective of income, many tax benefits phase out at higher income levels. Additionally, tax deductions are frequently less valuable than tax credits, which directly reduce the tax owed rather than just lowering taxable income, thus illustrating the importance of understanding the distinctions between these tax benefits.