Which of the following is an example of a tax deduction?

• A. Interest earned from savings
• B. Health care expenses
• C. Tax refunds received
• D. Lottery winnings

Answer: (B)

The correct answer is health care expenses, which are considered a tax deduction because taxpayers can deduct certain medical and dental expenses from their taxable income. This means that expenses incurred for medical care, health insurance premiums, and other related costs can reduce the overall amount of income that is subject to taxation, potentially lowering the overall tax liability.

In contrast, the other options do not qualify as tax deductions. Interest earned from savings is considered taxable income, which increases the amount of income subject to tax. Tax refunds received also do not count as deductions; rather, they are a return of excess payments from previous tax years and must be reported as income in the year they are received. Lottery winnings are treated as taxable income as well, meaning they also increase the tax liability instead of providing a reduction.