To "write off" taxes means to deduct certain legitimate expenses from your taxable income, thereby reducing the amount of income on which you owe taxes. This process lowers your total taxable income and, as a result, decreases your overall tax liability
. Key points about tax write-offs include:
- A tax write-off is essentially a tax deduction-both terms are used interchangeably to describe expenses that reduce taxable income
- To qualify as a write-off, the expense must generally be "ordinary and necessary" for the business or income-producing activity
- Common examples include business expenses like office rent, supplies, travel costs, salaries, and some personal deductions such as mortgage interest or charitable donations
- By lowering taxable income, write-offs can sometimes move you into a lower tax bracket, further reducing the tax owed
- Tax write-offs differ from tax credits, which directly reduce the amount of tax owed rather than taxable income
For example, if you earn $60,000 and have $10,000 in valid write-offs, your taxable income becomes $50,000, and you pay taxes on that lower amount, effectively saving money
. In summary, writing off taxes means subtracting allowable expenses from your income to reduce the amount of income subject to taxation, which lowers your tax bill
