Question

Which of these people will be eligible for a tax deduction?

a.Gareth, who gets interest income from banks
b.Nancy, who gets dividends from stocks and mutual funds
c.Miles, who makes cash contributions to charities

Answer 1

i would say the answer has to be C.

Answer 2

Interest from banks and dividends are both forms of income, which is taxed. But when you give to charities, you can actually *deduct* it from your taxes.
Let's say you have a stock that gives dividends. That means every month, or six months, etc (depending on the type of dividend) you get paid a certain amount. Sort of like a salary for having the stock.

"tax deductible" means that it can be *deducted* from your amount of taxes owed.