What is a Tax Write-Off?
When it comes to income tax in America, both in the private sector and in business, there are certain deductions you can make in order to lessen tax burden. For example, if a business brings in $100,000 in gross income, it will fall into a certain tax bracket and be liable for a certain tax. If, however, it claims deductions for employees, inventory and the general costs of running a business, the business will lower its total income and thus remove much of the tax burden. After all of the deductions, the company may find it has only $50,000 worth of taxable income, and thus fits into a much lower tax bracket.
Business Tax Write-Offs
If you are running a small business out of your home office, you have the opportunity to get a tax break. Measure the amount of space your home office takes up -- this space must be used exclusively for business purposes -- and you can deduct it from the value of your home. Likewise, you may be able to get a tax break for the money used to heat and cool the home in the hours you would not normally be there if it were not for your office.
If you have a cell phone used for business purposes, or if you have your employees on a company cell package, you can write this off as well. The only place you need to tread carefully is in the separation of business and pleasure. The IRS is wise to the ways in which people use their cell phones, so it may be in your best interest to keep cell phone records documenting that the majority of your calls were business related.
If you travel for business, you can deduct a great percentage of your expenses. If the trip is truly business oriented, you can even deduct a certain amount of your food and entertainment.
Individual Tax Write-Offs
Giving to charity is not only commendable, it is a great way to lower your tax bracket. Keep receipts of all your charitable donations and you can write them off at the end of the year.
If you happen to be an educator in a school, you probably know how much of your own money you have to put into your classrooms and curriculum. At least some of this money is now tax deductible. The IRS has approved tax write-offs for up to $250 for educator expenses.
Medical expenses are tax deductible if they meet or exceed 7.5 percent of your adjusted gross income. Consider not only your own expenses, but those of your entire family. Consider the mileage to and from doctor's appointments and uninsured medical expenses such as non-prescription eyeglasses. Surgeries rarely covered by insurance may fall into this category.