In regards to taxes, the term write-off refers to a reduction in an assets value. When viewing an income tax statement, tax write offs refer to a reduction in the individual or entity’s taxable income as recognition of certain expenses required to procur or produce the income.
Tax write offs are typically offered to individuals who purchase goods or resources that are specifically used to increase their income. In addition, tax write offs can also be issued to individuals who travel for business, purchase any items associated with their business, and who participate or donate to charitable organizations.
A write-off is an itemized deduction associated with an asset’s or an item’s value from the individual’s taxable income. For example, if a person has a taxable income of $100,000 per year, a $50 telephone which is used for business purposes would decrease the taxable income to $99,950.
The decreased income, although minor in regards to real integers, is realized through a decreased percentage payment. The person, who is represented a specific percentage within their tax bracket would be charged their respective percentage on the deducted income and not their old income. Therefore, tax write offs effectively lower an individuals tax payments and rates.
There are other vehicles or maneuvers an individual can partake in to avoid or lower their tax payments. To entice saving, tax free savings accounts are offered through numerous corporations. Tax free savings account allow an individual to accrue interest without paying taxes on the added income. These accounts encourage individuals to save and be frugal with their money.