If a cost is tax-deductible, you are allowed to take it off your income before the government works out how much tax you owe. So it lowers the number your tax is calculated on. Say you earn 1,000,000 and you spent 100,000 on something tax-deductible: the tax office treats you as having earned 900,000. The important thing students get wrong is what you save — you do not get the 100,000 back. You only avoid paying tax on that 100,000, so if your tax rate is 20%, the cost really saved you 20,000. Typical examples: business expenses, charity donations, some insurance, some medical costs, certain loan interest. It is an everyday word in the English-speaking world because people there file their own tax returns and talk openly about this. The hyphen is usual before a noun ('a tax-deductible donation'); after the verb, you will see it both with and without ('the donation is tax deductible'). People also shorten it to just 'deductible'.