Question

what is the difference between an exemption and a deduction.

Answer 1

An exemption is an amount of money that is automatically excluded from taxable income by law. Personal and dependent exemptions are a good example. They reduce your taxable income by $3,650 for each one that you can claim.

A deduction is an amount of money that you can optionally reduce your taxable income by should you choose to do so. The deduction for mortgage interest or charitable donations are a good example.