Posted by Administrator
This is probably one of the most common tax terms that the average Joe will fling about casually with out really knowing what they’re talking about. How often have you heard someone say “oh, I’ll just write this off” and nodded knowingly pretending you actually understand what that means? Perhaps you have even used the term yourself, or smiled and pretended to ‘get it’ when someone informs you that being able to “write it off” makes a decision more financially favorable.
Clearly I am not saying that everyone who uses this term doesn’t know what they are talking about. But obviously you yourself have some questions because you are reading this blog, the title of which clearly indicates its content. So here’s the 4-1-1. (A term meaning an informational breakdown of the facts).
A write-off is the same thing as a deduction. A deduction is a certain dollar amount that you are subtracting (or ‘deducting’) from your total taxable income. By doing this you decrease the amount of your taxable income (without affecting your actual income in any way) you have to pay less taxes. For example, if you make 50K gross a year, and so fall into the 25% bracket, you will owe $12,500 in income taxes, which your employer will withhold from your paycheck. A $500 deduction means that you will only be taxed on 49,500 of what you made, for a total of $12,375. A $500 deduction will save you $125 in taxes. ($500 multiplied by whatever your tax bracket tax rate is).
Now that you know exactly what a write-off is, make sure you look into the list below. All of these are things that you are eligible to write-off, or deduct, so make sure that you, or whoever is doing your taxes, is saving you as much money as possible.
Depreciation Expense on capital equipment (furniture, fixtures etc)
Personal Property Taxes
Interest on your Home Mortgage
Tax Preparation Fees