“I’ll just write it off,” is one of the most common things to hear business owners say when it comes to expenses. But is that how it works? How do you know which expenses are eligible to be written off and how much are you supposed to write off? The answers to these questions are far more complex than you’d think. For starters, it depends on where you live and what kind of expenses you are talking about. While it is always recommended to speak with a financial expert about your unique needs, there are a few guiding rules that can help you better understand tax write-offs and other financial incentives!
What Is A Tax Write-Off
A tax write-off, in its simplest form, is a business expense that is deducted to reduce a business’s tax burden. Essentially, a business expense is deducted from the income to reduce the total income that a business pays taxes on. While this can certainly help businesses, business owners mustn’t abuse write-offs as it would be considered fraud.
For an expense to qualify as a tax write-off, the expense needs to be considered essential to running a business.
What Kind Of Expenses Can Be Deducted?
So you have a business and your business has expenses. Which ones qualify as a tax write-off?
While this will vary from industry to industry, some of the more common write-offs include advertising, supplies, rent, employee salaries and benefits, the cost of contractors, and miscellaneous expenses such as meals and travel.
The important thing to understand about tax write-offs is that not every business expense may qualify and not 100% of every expense may qualify as a tax write-off.
For example, if you work from home and your office space is 30% of your home or apartment, then you can write off no more than 30% of your expenses.
Is There A Limit To How Much I Can Write Off?
While there is no limit on how many individual deductions you can claim, there may be limits to how much you can deduct from a specific expense. Some expenses can be written off at 100% of their value, other expenses may be capped at a set dollar amount or percentage.
ProVision Wealth – Tax Consulting and Preparation
At ProVision Wealth, we provide guidance specific to you and your business on the most effective ways of minimizing your tax liabilities allowable under the law. We look at your business and determine the best steps for overall tax efficiencies. By providing tax consulting services we try to minimize the effects of numerous tax facets which clients experience.