A tax write off is an expense that qualifies for inclusion as a deduction on your annual income tax filings. While all deductions must be necessary to your business, not all expenses you consider necessary for your business qualify as write offs. Understanding the difference between the two will help you better plan your spending.
When you spend money to operate your business, in most cases, you may include that cost as an expense against your revenues to help you determine your income. Income is the money you have left over after you pay your bills, also known as pre-tax income, and the amount used to calculate your income tax. Common write offs for a small business owner include rent, phone, post office box, stationery, a website and advertising. If you work from your home, you can deduct a portion of your mortgage and utilities based on the square footage of your house used exclusively for business.
If you take a client out for entertainment or give that person a gift, you may only deduct a portion of that expense. For example, if you take a client to dinner, you can only deduct the client's portion of the check. Gifts deductions are limited to $25. If you drive your car to make a sales call, you can write off that mileage; however, if you commute to work each day, you cannot deduct the mileage. While a charitable contribution might not be necessary to operate your business, you can write off the contribution if it’s to a qualifying charity.
Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.